Another well-used credit scoring system by lenders to ascertain your creditworthiness for credit cards and loans is the FICO score. But is the FICO score shown on many websites and services the same score lenders use? Not inevitably. This post will explain what FICO scores are and the reasons for any differences between your ratings and those lenders see.
Developed by the Fair Isaac Corporation popularly known as FICO, FICO scores are credit ratings. Fair Isaac has developed various FICO scores throughout the years; so, when individuals discuss their FICO score, they more often talk to their FICO Score 8 rather than a single number. These are among the most often used credit ratings among the many ones used by various lenders nowadays.
FICO scores are on a scale of 300 to 850 with a higher FICO score meaning better credit and a lower chance of defaulting on a loan. Any score that is above 700 is regarded as good or a good credit score while any score below 600 is regarded as a poor or bad credit score. Your FICO score is a personal credit score derived from data contained in credit reports generated by the three credit bureaus, namely Experian, TransUnion, and Equifax.
Understanding the Various Flavors of FICO Scores
There’s also FICO Score 8, the common FICO score you can access through different websites and services, but there are industry-specific FICO scores lenders can use to assess your creditworthiness. These include:
FICO Auto Score: Utilized in automobile financing. FICO Bankcard Score: For credit cards FICO Mortgage Score: Mainly used for home loans
There are also the older models of FICO score termed as FICO Score 5 and FICO Score 2. However, likely, some lenders may still use those general credit scoring models they applied before when approving loans.
Why Your Score Might Be Different
When you use a website or service to check your credit score then you are only getting one of the three main credit bureau scores. For instance, the free credit score they provide you from your bank usually comes from your TransUnion credit report only. Credit Karma mainly reports Equifax credit information.
However, the credit reports as well as scores used by the lenders are often derived from various bureaus at the time of applying for credit. And if the lender is using industry-specific FICO scores or older FICO models, those scores can be quite different from your FICO Score 8.
Your FICO 8 scores which are provided by each credit bureau will probably differ to some extent because the data in your credit reports is not fully identical. For instance, one bureau may report a past-due payment on an account and the other may report it as a timely payment if the two reporting dates are slightly different.
Therefore, the score that you can obtain online is typically different from the score that a lender will use. It is rather a rough assessment or rough measure of your creditworthiness.
Why It Matters
Such differences might be raising questions in your mind as to why such discrepancies are important if you can at least get a glimpse of a credit score before. There are a few reasons why the differences are important: There are a few reasons why the differences are important:
- Lenders can never tell for sure what score they will be encountering. Therefore, even if you have a good FICO Score of 8 on the internet, the lender's score may still turn out to be a lot worse.
- It is the same as checking your score because it does not reveal all that any lender can see or factors that might influence a decision. Credit reports provide information besides the score, such as negative items that one feels are dragging him or her back.
- This way, you can challenge wrong information before it reaches the lenders, which means you can counter the bureaus without worrying about the information that is already out there. However, what you can’t negate is information that you cannot physically or visually encounter.
To summarise, the FICO score you obtain yourself can be beneficial as a starting point but does not give you the complete picture of the information that is available to the lenders.
How to Check Your Actual Lending Scores
If you want to check the actual credit scores lenders are most likely to use, here are a few options: If you want to check the actual credit scores lenders are most likely to use, here are a few options:
- You should go to AnnualCreditReport. com and request your full credit reports to check the details of all three agencies. This yearly un-scored report does not come with scores but you can view your accounts and history of payment.
- You can get your FICO Score 8 reports and scores from myFICO. com and access your scores from Equifax, TransUnion, and Experian using the latest FICO models.
- Opt for the services that include FICO score tracking products such as Experian BoostTM or Identity Guard® that give you constant access to the FICO Scores.
The more often you can verify your reports and scores from all three bureaus using FICO’s latest models, the better idea you will have about what lending scores prospective credit providers may be seeing. It is still not a perfect solution but it brings you closer to knowing your actual creditworthiness before seeking credit.
In a nutshell, the implication here is that the credit scores provided by the banks and those available for free on the internet sources are useful benchmarks but they may not be the scores most lenders will use in making their credit decisions. Using myFICO or credit monitoring services instead of checking my credit report and score can give more information about what to expect when applying for a mortgage, auto loan, credit card, or any line of credit requiring a credit check.
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