In today’s credit score driven environment, when having a 680 score instead of 679 can mean paying hundreds or even thousands less in mortgage fees, your EXACT “representative credit score” is a big deal. Yet pinpointing that exact score is not an easy thing to do.
“I pulled my credit and paid extra to get my scores, and when I applied for a home loan I was told that it was 15 points lower. Why?”
I get some version of this inquiry all the time, so here’s your answer.
Each Credit Bureau Can Have Different Data
Creditors are not required to report to any or all bureaus. When I worked as a systems consultant for Experian, we asked our client companies to report their accounts receivable data to us, and we gave them a discount on the credit reports that they pulled if they reported their customer data, but we didn’t require it. Smaller companies especially were less likely to report their data because the costs of reporting were not offset by the savings on the relatively few reports that they pulled. On the other hand, major companies generally report to all three of the top bureaus.
Different Scores Are Calculated Differently
Even if every bureau has exactly the same information, it isn’t necessarily used the same way to come up with a score. For example, mortgage lenders generally pull a FICO score. FICO scores range from 300 to 850 and incorporate five factors — payment history (35%), length of credit history (15%), amounts owed (30%), types of credit (10%) and new credit (10%). If you pull your own credit score online, however, you’re likely to get a VANTAGE score. VANTAGE scores range from 501-990, and incorporate six variables — payment history (32%), utilization (23%), balances (15%), depth of credit (13%), recent credit (10%) and available credit (7%).
Different Industries Purchase Different Versions of Scores
The FICO score pulled by an auto dealership might be different than the FICO pulled by a mortgage lender because it will weigh your auto payment history more heavily. If you had a car repossessed but paid everything else perfectly, your auto industry score will probably be lower than your mortgage industry score.
Finally, many lenders have proprietary systems to calculate custom scores based on their specific credit products and client base. These scores often rank you in comparison to other customers and may work more like a grading curve than a general purpose credit score.
The score your lender uses may be 10-15 points lower than the score you pull yourself online. However, not everyone uses the same model in the same way — getting more than one mortgage quote should help you winnow out the best rate and lowest cost overall. Will all these mortgage lenders pulling your credit hurt your score? No — FICO ignores mortgage inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won’t affect your score while you’re mortgage shopping.
LendingTree is the nation's leading online loan marketplace providing consumers an easy way to shop and compare funding for life's matters. With LendingTree's marketplace, you can connect with multiple lenders that compete for your business. You can also find an array of credit based tools and tips on LendingTree, including free monthly credit scores to help you stay empowered financially.
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