If you look at your credit score from your credit card company, you think this is your “real” credit score. Whether you paid for your score or not, the score is probably different from what a lender would get.
First of all, it is more important to know what is in your credit report than to know what your credit score is because your credit score is based upon what is in your credit report. Also, remember that your credit score changes.
You may get a free credit report once every twelve months from each of the three major credit reporting agencies, Experian, Equifax, and TransUnion, at annualcreditreport.com. You can access this online, or by calling 1-877-322-8228.
You can also print a form from the website and mail it in if you wish to obtain your free credit report that way. If you choose, you may request all three at one time, or request one every four months.
Recently, the Consumer Financial Protection Bureau (CFPB) announced an enforcement action against two of the credit reporting agencies by deceiving customers about the value of the scores sold. In their advertising, Equifax and TransUnion have falsely represented that the credit scores they marketed were the same scores lenders used to make credit decisions. The scores sold by TransUnion and Equifax were not typically used by lenders to make those decisions.
As part of the action, the companies will pay more than $17.6 million in restitution to consumers, and another $5.5 million in penalties to CFPB.
CFPB wants consumers to realize there is no one magic three-digit number that lenders use to assess borrowers’ creditworthiness and set rates. The scores you see can vary widely from source to source – as much as 40 points.
Score type – Different models are used for each credit-reporting agency. Many lenders use FICO or VantageScore brands. Each model gives different weight to factors like how much of your available credit you are using and your payment history.
Customization – Lenders “weigh” different factors like credit card debt or car loans.
Credit-scoring company – Use data pulled from your credit report at one of the three major firms. Information will vary and there may be errors.
Score version – Scoring models are updated regularly, every 15-60 days – so the lender may not have the most current version. Mortgage lenders tend to use older models.
Timing – Your score can change daily as the information in your credit report changes.
Variation does not mean you should not pay attention to your score(s), there are free ways to take a look, including third-party sites and a perk from your credit card issuer.
Every credit score that is given away or sold to consumers has value. You will be able to see whether you have a good or poor score regardless of the brand. The key takeaway is any information provided with your score indicating why the number is what it is.
This information tells you what actions you might take to improve your creditworthiness.
For more information on credit management, contact Susan Cosgrove, Financial Management Area Extension Agent, at 601-635-7011.
