My Credit Score Is 760. No It Isn’t.

March 7th, 2013

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If you’ve looked up your credit score on your own before then you know your credit score, right? Well, you may not know your accurate credit score, and you likely only know one credit score instead of all three. One problem with credit scores is that lenders use three credit scores, one from each of the large national credit bureaus which are Equifax, TransUnion and Experian. So if you see a 741 credit score on a consumer credit report you pull, a mortgage lender may see a 698, a 723, and a 741. And the mortgage lenders use the middle credit score or the 723. That may cause a change in an interest rate that is being quoted to you.

Another problem is in knowing the type of credit score that is being quoted to you. The most widely used credit score is called a “FICO score.” FICO is a pioneer in the credit score industry. FICO was founded in 1956 as Fair, Isaac and Company by engineer Bill Fair and mathematician Earl Isaac.

However, there are actually 60 different iterations of FICO, and lenders may pull a different FICO score depending on what kind of credit you’re applying for, or there may be a different FICO formula used depending on who is pulling the credit report. For instance, certain credit scores ignore collection accounts below $100. In some cases, a person with a small $80 collection that is not being calculated into the score may have a score that could be 100 points above a FICO score that doesn’t ignore such collections. So in my office we say consumers usually pull a credit score that is Fake-O, not FICO.

Many times the consumer pulls the credit score from freecreditreport.com, annualcreditreport.com, their own banks, or their own credit card companies. Whichever third-party provider they go to it is an “educational credit score” or a “generic credit score.” These scores are provided just to give you a perspective on your credit standing. They’re not the FICO scores that lenders actually use when considering a loan application. Your third party provider might also use a proprietary credit score that’s developed for use just for them.

FICO has released many updates to the score models over the years, and some lenders still use earlier versions. While many lenders use FICO 8, a score the firm launched in 2008, in evaluating applications for credit cards and some other consumer debt, most mortgage lenders use an older version. So if you get your credit score for free from your credit card company, that won’t equate to what the score is that a mortgage lender pulls.

Most car loan lenders use a FICO “auto score” that more heavily weights prior experience with car loans. Borrowers who previously had a car loan and made their payments on time could end up with a higher auto score than the score a mortgage lender pulls. And the same setup exists for credit-card lenders, some of whom use a “bank card score” which will be different than the score a mortgage lender sees.

Another important note: as a result of the FACT Act (Fair and Accurate Credit Transactions Act), U.S. residents are entitled to a free copy of their credit report from each credit reporting agency once every twelve months. The law requires that all three agencies provide these reports, but these credit reports do not contain credit scores.

Unfortunately the only way to get all three accurate FICO credit scores, at least as far as it pertains to getting a mortgage approved, is to have a mortgage lender pull them for you.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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