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Modified date: March 22, 2021.
A reader recently wrote in asking about credit scores. She wanted to understand why the credit score she received from the credit bureaus was different than the score used by her bank. Here’s her question:
Q: I enjoy reading your blog. I have one question regarding the credit scores. I checked my credit scores with the three credit bureaus, and I was happy to see that my scores were all up well above 600 for each of the bureaus.
Then I went to my credit union. To my big surprise, the manager, after checking my scores based on their system, [said my credit] was well below what I saw with the bureaus.
She told me the credit score we as consumers see with the bureaus is always higher than what lenders such as credit unions and banks see. My question for you is – is this really true? If so, how can we as consumers get our real credit score before going to the lender?
A: So what’s going on here? Several things. First of all, let’s think about credit scores generally. How are they calculated? You need two things to calculate a credit score: data and a credit scoring formula.
The data comes from the credit bureaus – TransUnion, Experian, and Equifax. Each bureau compiles data about your bill paying habits, late payments, credit limits, credit utilization, inquires, and more. To calculated a credit score, this data must be paired with a formula.
The most widely recognized formula comes from FICO. (There are a few competing formulas on the market, but FICO is still the most widely used by the majority of lenders.) We need these two things to generate a credit score.
There are, however, a couple of problems we could encounter that can result in different credit scores. One is that the information in your credit file may vary from one credit bureau to the next. For the most part, the data will be similar, but there will probably be some differences.
Why? Well, you may have a car loan or a bank loan that doesn’t report to all three credit bureaus. The creditor may only report to one or two of them. So one will have the information, but the others will not. One of your credit files may have errors in it, which is actually quite common. It’s not uncommon to check your credit file and find differences between each of the three major bureaus. So that’s part of what’s going to result in different credit scores.
Tip: Use Experian Boostв„ў to track your real FICOВ® Score.
The second reason, which is actually even more of a problem, is that there are multiple credit scoring formulas. Even FICO, which you’ve probably encountered, has several different scoring formulas.
There are a couple of reasons for this. FICO is constantly tinkering with its credit scoring formula to get the most predictive tool possible. The goal is to get a formula that accurately predicts credit risk, and they’re constantly adjusting the formula to achieve that goal. Some lenders may choose to use the newest version of the formula, but others may continue to use older versions. (Remember, it usually costs lenders money to update their systems with the latest FICO formula.)
The second problem is that some lenders and industries have customized versions of the FICO formula. For instance, the FICO formula used on your credit file when you apply for a home loan might be different from the formula used when you apply for a credit card.
And there’s still one more problem. Lenders can customize their processes even more on their own. Some lenders take into account other information outside of your FICO score or even your credit file. Some develop their own formulas – or use a formula that wasn’t developed by FICO. And some take into account other information that they may have on you.
So even if we’re looking at the exact same data from the credit bureaus, there are still many formulas to generate a credit score. And this leads to each individual having a variety of possible credit scores. As a result, your lender may and in most cases probably does see a credit score that’s different from what you may have obtained through one of the credit bureaus or even directly from FICO.
That’s the bad news.
The good news is that if you check your credit score through FICO, it will likely be reasonably close to what most lenders will see. I know “reasonably” and “most” are caveats here. You could wind up with a lender that doesn’t use the FICO Score or uses an older version of the formula.
As to the reader’s question, is it always the case that the score you get from a FICO, Experian Credit Karma or other score providers higher than the score a lender sees? Absolutely not. I actually know from personal experience in applying for mortgages that sometimes the score a lender receives is higher than what you get yourself. So your score could be higher or lower for a lender than it is for you. You just don’t know.
There are a few other things to consider. If you check your score in January and then apply for a loan in March, your scores could be different just because there’s more information in your credit file. When your score gets pulled in March, the lender is using the most up-to-date data from the credit bureaus.
Also, regardless of which formulas are used, you’ll take the same steps to improve your score. Paying your bills on time, keeping credit card balances low, and leaving older accounts open will help raise your score.
Ready to increase your score now? Experian Boostв„ў can help raise your FICOВ® Score with every utility and mobile phone bill you pay on time. Until now, those payments did not positively impact your score. Start now for free.
Experian Boost Disclaimer - Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.
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If you are in the market for a loan, the best place to find the score most likely to be used by lenders is directly from FICO. You can click here to be directed to the FICO website, where you can check out your FICO score.
Another option is to check out Credit Karma and/or Credit Sesame. I did a study based on my own credit scores to see how similar their (free!) scores were to the actual FICO Score I obtained when I applied for a mortgage. The scores were surprisingly close. Plus, these services can show you what’s helping your scores and what’s hurting your scores. Even if the number isn’t perfect, you can get an idea of what you’re doing right and what you could do better if you need to improve your credit score.
And if you’re in the market for a big purchase – like a home or a mortgage refinance – that information can be invaluable.
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correct score predictions bets are played dry. The player indicates the exact number of goals that both teams will score in the course of ninety regular minutes. Certainly a very dangerous game in the eyes of an expert. The professional player knows correct score tips are a great asset if well placed. We basically have two different approaches.
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The second approach is a little less mathematical but certainly no less methodical. You make predictions based on your knowledge of the teams that will take the field. It is an approach that relies heavily on factor c, which is luck. In the first case, however, what the player tries to do is eliminate luck as much as possible to try to be certain on the correct score.
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