Credit Score Variations
Did you know that your credit score can vary depending on who
pulls your score and why? Imagine this.... You need a new car
and are thinking of buying a home too. You do your homework and
pull your score online directly from the credit bureaus. Your
score online is 650. The car dealer tells you your score is 619
and your mortgage officer says your score is 694. Why the
different scores? What causes such discrepancies?
Lets look at 3 items that can make your score vary.
1. Which credit bureau was the credit pulled from?
There are 3 major credit bureaus: Equifax, Experian, and
Transunion. Each bureau collects information as reported by your
creditors. However, your creditors may not report to all 3
bureaus. This means that you may have different information in
each bureau. Different information can make for different
scoring outcomes.
2. There are differences in scoring models.
A scoring model is the formula used to create your score. Fair
Isaac is the company that creates the models for the 3 bureaus.
While there are 3 different bureaus, each bureau can have
different models of scoring. Think in terms of computer
programs... one program may go through updates and changes
(version 3.0 and then 4.5.) Both versions work, but have
different options based on the version. The same principal works
here. The bureaus may be using different versions of scoring
models depending on who pulls the credit.
3. What was the reason for the credit inquiry?
One more factor may be the reason your score was pulled. You
see, buying a home should require different parameters that
getting a credit card or buying a car. Each one of these will
weigh different factors of your credit file more heavily. For
example, a credit card company will want to factor revolving
credit more heavily that a car loan. This way they will have a
better indicator of how you will handle the new revolving credit
card they are considering giving you. So the reason for your
credit inquiry (mortgage, loan, credit card, ect.) will impact
what makes your score up. Note: Federal law now requires that
all 3 bureaus make a free copy of your credit report available
to everyone. Since there are no others reasons for the inquiry
the score will be generic based on all your credit, not a score
potential creditors will use in their decisions.
Does this all seem confusing? Well unfortunately it is. Federal
law now requires that when a credit inquiry is performed, you
have the right to know the score and the indicators that helped
make up that score. With the new laws enacted Congress is trying
to make things better. Still, the best way to overcome these
discrepancies is to build a solid credit file!