Lenders use different credit scoring models to gauge your risk as a borrower. Each lender chooses the one that best suits its needs, and some use scores that are weighted according to their industry. For example, a mortgage lender might use a different scoring model than an auto lender. Other lenders use a blend of the scores that are assigned to you by the three credit reporting agencies (CRAs)...
A credit score calculates your risk level for a lender based on your past performance managing debt. What many consumers do not realize is that they have more than one credit score. Numerous formulas exist for calculating credit scores, and each bureau does so a different way. Because no two formulas are the same, your credit scores will differ depending on the type of credit score you pull. In addition, you have a separate credit score with each of the three credit bureaus. If you pull a different type of credit score than your lender pulls, your numbers and your lender's numbers won't be the same.
The majority of mortgage lenders utilize FICO scoring. FICO scores are based on a proprietary formula owned by the Fair Isaac Corp. When a lender requests your FICO scores, it receives a tthree bureau report that contains your FICO score from each credit bureau. Unfortunately, consumers don't have access to all three of their FICO scores. You can purchase your TransUnion and Equifax FICO scores directly through the Fair Isaac Corp.'s website, myfico.com. You cannot, however, purchase your Experian FICO score. Experian releases FICO scores to lenders, but not to consumers.
Most individuals who decide to pull their credit scores online visit what they believe is the most reliable source for the information – the credit bureaus. The credit bureaus, however, sell you their own proprietary score known as a “Vantage Score.” FICO scores ranges from 300 to 850, Vantage Scores ranges from 501 to 990. Due to its higher range, your Vantage Score will always be higher than your true FICO score. This can lead to disappointment when you visit a lender armed with what you believe is an excellent credit score only to be told that you aren't as qualified as you thought you were. The only way to ensure that the scores you are purchasing are legitimate FICO scores is to buy them directly from the Fair Isaac Corp.
Your FICO score is calculated using the information that appears on your credit report with each credit bureau. You don't have to pay to review the information for accuracy. The Fair Credit Reporting Act gives you the right to pull a free credit report from each credit bureau once each year at www.annualcreditreport.com. It does not, however, give you the right to free FICO scores each year. Advertisements for free credit scores generally require you to sign up for an annual service or don't offer you your actual FICO scores. The bad news is that if you want real FICO scores, you'll have to pay for them. The good news, however, is that with your real FICO scores in hand, you can rest assured that your scores will match your lender's.
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