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Why a Lender Sees Different Credit Scores Than What You See

Some consumers who see their credit score before seeking loan preapproval are confused and frustrated when a lender comes up with a different number.

It's important to understand that the educational score you get from FICO, Experian or another credit agency may not quite correlate to the more tailored credit score your lender see. These specialized credit scores, which are weighted more toward mortgage-related factors, aren't something you can get a look at ahead of time.

The good news is that prospective borrowers with solid credit shouldn't have much if anything to worry about. But those on the bubble might have to put in a little more work in order to secure home loan financing.

Here are some other things that may be helpful to keep in mind:

Credit Scores Are Compiled in Different Ways

A credit score is a numerical representation of a consumer's assessed creditworthiness based on credit information. Credit information is compiled by credit reporting agencies, or CRAs. These include TransUnion, Equifax, and Experian.

Many people believe that when they purchase a credit score from a credit monitoring service, they have access the same information as a potential lender. Unfortunately, because CRAs don't share credit information, this is often not the case. Even companies who use the same credit scale may not come up with identical scores. This is because consumers and lenders have not only different models, but different formulas that emphasize specific aspects of a consumer's credit history.

Different Scoring Methods

You do not have a universal credit score. The number you receive depends on the scoring method being used and the type of loan or credit you are applying for. Here is a quick rundown of the most common methods:

  • FICO Score: The Fair Isaac Corp. score is the standard for many lenders. Check out a basic breakdown of how FICO scores are calculated.
  • VantageScore: Co-developed by TransUnion, Equifax, and Experian, this model combines data from all three CRAs.
  • Educational score: Each CRA also has its own proprietary scoring model. While not used by creditors, these scores are designed to help consumers manage debt, identify problems and minimize identity theft. Most credit monitoring services fall under this category.

The truth is that you could spend hundreds of dollars finding and documenting your credit score through each one of these services and still not come up with the same number as your lender.

So What Can You Do?

Despite the confusion surrounding credit scores, your objective should still be the same: Maintain a clean credit history.

Instead of using a credit monitoring service, you can obtain a free credit report every 12 months. Use this to develop a baseline of what to expect when speaking with a lender and to identify and correct any mistakes.

Finding and correcting inaccurate credit information is also imperative for making sure you receive the best credit score possible. Knowing you have a clean credit history can give you confidence when speaking with any lender, no matter the scoring model.

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