WHY CREDIT SCORES VARY AMONGST THE VARIOUS CREDIT REPORTING COMPANIES

Credit scores are one of those things that both consumers and sometimes lenders scratch their heads and say, “How did they come up with THAT credit score?”

The scores you hear about the most are FICO scores (acronym for the Fair Isaac Corporation, the creators of the FICO score). It’s the one that most mortgage lenders use as one of the benchmarks to see if you qualify to refinance or purchase another home. Usually 3 scores are provided, and the lender uses the middle score as the basis for granting (or denying) a loan.

The thing about FICO scores is that the credit score may vary from lender to lender. Why? Because over the years, Fair Isaac has updated their credit scoring model software (best estimate, about 85 times), but the credit bureaus who buy the software from Fair Isaac do not always update their own software. One lender could be using the latest version while another lender’s model is several years old.

However, not everyone uses FICO scores as a guide. Here are some other credit scoring models that are used by various industries:

Auto Loans – If you apply for an auto loan through a dealer, they have developed their own credit scoring models, which are completely different from those used by mortgage lenders.

Insurance Companies – The insurance premium you pay for homeowners or car insurance also depends upon the credit scoring model that insurance companies use. Oh, and it will vary amongst insurance companies.

Vantage Scores – If your occupation/employment requires you to be “licensed” (especially in the financial services industry) and to obtain (or maintain) your professional license, Vantage Scoring model software is used.

Free Credit Reports – Current regulations entitle you to one free credit report (per bureau) each year. While it won’t be exactly what mortgage lenders see when they order a credit report on your behalf, it will be “in the range” and is a good indicator of what to expect.

As I mentioned, you are entitled to one free credit report — PER BUREAU. Go to www.annualcreditreport.com and you can request one credit report from EACH of the 3 bureaus listed.

A word of caution! Be careful when signing up for offers to provide you with a FREE credit report. If you are asked to enter your credit card number, very likely you are actually signing up for a credit monitoring service — which may cost you $300 plus per year.

Please let me know if you’d like me to review you or your client’s credit report. I can make suggestions on how to increase your credit score. Sometimes it just takes a little tweaking to increase it by 25 to 50 points.

Questions? Give me a call at 360-459-1200!

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