Buzz
If you’re looking to finance a car or home, chances are you’ve checked your credit score to gauge how favorable it is. You might feel confident, only to be denied unexpectedly.
What happened? It’s probably because you could have dozens of credit scores, and your lender pulled one that painted you as less creditworthy than others. Cassie Price, a credit repair expert for Daily Worth, writes, “I’ve seen credit scores differ by as much as 100 points across different scoring models, even when pulled the same day.” She continues, “A lender might check one score or a few, and they may use different models. The only score that matters is the one your lender decides to use.”
There are two major credit scoring systems: FICO, which you’re probably familiar with, and VantageScore. Additionally, there are three major credit bureaus—Equifax, Experian, and Transunion—that gather distinct information on you at various times.
All three bureaus generate both FICO and VantageScore ratings, and lenders can choose which one they want to use. Credit Karma reports that approximately 90 percent of lenders prefer FICO scores. However, some lenders create their own scoring models, and FICO and VantageScore have developed separate models for different financial products such as mortgages, auto loans, and credit cards. This means the score your mortgage lender sees may be different from the one your auto loan lender uses.
There are also various updated versions of your FICO and VantageScores (the most commonly used score, according to Forbes, is FICO 8). Here's some background info, courtesy of Bankrate:
The original FICO scores were introduced in 1989. These scores, and their subsequent versions, predicted the likelihood that a consumer would fall 90 days behind on payments within the next 24 months across different types of debt. Over time, the formula has been adjusted to reflect shifts in consumer behavior and the evolving lending environment, according to Frederic Huynh, senior principal scientist at FICO.
For instance, FICO 8, which debuted in 2009, places less emphasis on isolated late payments compared to older scores but penalizes high credit card balances more. It ignores collections under $100 and reduces the impact of authorized user accounts.
FICO 9, which has been rolled out, “treats medical debts less harshly and completely ignores paid collections accounts.”
You don’t have control over which score a lender uses, but it's important to understand that there is no single score that dictates everything (since credit scores and reports aren’t necessarily fair or truly reflective of you or your financial standing). However, your FICO score is generally a reliable indicator of what lenders will see. If you’d like to improve it, here’s a helpful guide.
