Not All Credit Scores Are Created Equally

Has this ever happened to you? You and your spouse are eager to buy a car or a home, you jump online to one of the plethora of credit monitoring websites:credit scores

You get your credit reports and the score listed on that particular website. It shows that your credit isn’t as bad as you though it was! So you and your spouse, kids in tow, head on down to the auto dealer or the home show. You walk into the lending office with the confidence of Donald Trump about to close a deal, when the finance office pulls your credit (and you know it’s not a good thing when many minutes tick by), the loan officer comes into the waiting room and utters the following agonizing words: “Um, there is a problem with your credit.” You’re wondering, how could this be? We just pulled our credit and it shows that we had good credit.

Here’s The Problem

Ever since Bill Fair and Earl Isaac teamed up in 1956 creating the Fair Isaac Company (FICO) to create a more streamline method of determining “credit worthiness”, banking and credit reporting companies wanted in on the profits that FICO was creating. Because the FICO credit scoring algorithm is patented and proprietary, other companies that wanted to get in on the credit scoring business couldn’t use the FICO method of scoring. They had to come up with their own scoring models. Every scoring model in use is based off of the same raw credit report data that is gathered from the three credit bureaus, TransUnion, Equifax, and Experian. The difference comes in how that raw data is “weighed” in order to generate a “credit score”, thus creating the problem in the above family scenario: the website the family went to showed one credit score, while the finance company showed an entirely different score- all based on the exact same credit report information. The following chart show how the different scoring models relate to each other:

Grade FICO Score     VantageScore       PLUS Score       TransUnion Score     CreditXpert Score
A        750-850          901-990                740-830              845-925                   800-900
B        700-749          801-900                695-739              765-844                   740-799
C        650-699          701-800                655-694              685-764                   670-739
D        600-649          601-700                590-654              605-684                   611-669
F        300-599          501-600                300-589              150-604                   300-609


So What Is My ACTUAL Credit Score?

There is no such thing as an “actual” credit score. A credit score is just that particular scoring company’s analysis of your credit. It’s no better or worse than any other credit scoring model. FICO has become the industry standard because they invented the idea of credit scoring and were first to market it to the lending world.

The question you need to go into the finance office with is: “What credit scoring model do you use? And which credit bureaus do you look at?” With any scoring model, you will have three separate credit scores. You will have an Experian score, Equifax score and a TransUnion score. They will all be different from each other because not all lenders report equally to all three credit bureaus.

If the lender can tell you in advance which credit scoring model they are looking at and which credit bureaus they will watch, this can give you a great advantage prior to stepping into their office. This will give you time to purchase the reports and the scores they will be looking at to get an idea of what they will see before you even arrive.

Can I Get A Free Credit Score?

As of this publication, you are not able to get a free credit score; there has been proposed legislation to change that. You are able to get a free credit report every 12 months from the three credit bureaus from