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| More rates and news from Credit Score Confusion
(Getting your credit score can be something that leads to a lot of confusion for many people.)
And this is because there is no one ruling or absolute power over this all-important number.
In fact, there are three major credit reporting bureaus and a few different systems that compute your credit score.
This makes it so when you apply for a loan, your lender could be seeing a different score than the one you just paid for.
So why all the confusion?
“Conflicting credit scores cause confusion,” a December 7, 2006 article by Holden Lewis of Bankrate.com explains why there are so many misunderstandings in the world of credit scores.
“Confusion arises because consumers and lenders often see different credit scores. As if that didn't create enough of a misunderstanding, customers, lenders and credit bureaus each view credit scores from their own perspectives. When these viewpoints clash, consumers get frustrated.”
Every smart consumer first needs to know about the FICO score, developed by Fair Isaac Corporation that pretty much every mortgage lender across the nation uses.
They use this score to determine whether a customer is eligible for prime rates (those with the highest scores) or subprime rates which are offered to people with lower scores and come with less desirable rates and terms. FICO scores range from 300-850, the higher the better.
Then there is the VantageScore, “which was jointly introduced this year by the three big national credit bureaus: Equifax, Experian and TransUnion. The VantageScore is based on a scale of 501 to 990. If any mortgage lenders use it, they don't talk about it.”
There can be a great disparity between these two numbers, and some people do not even know that they got a VantageScore instead of a FICO score until they went to take out a mortgage and found they were a subprime borrower, instead of the prime borrower they believed they were according to the VantageScore.
A Bankrate.com reader, “Bob from New Hampshire” discussed how he bought his credit score from one of the companies only to find out that it was not the FICO score he thought he was getting.
“Bob feels that the credit bureaus are bilking consumers by selling the VantageScore. ‘If the score they're giving you here, you're paying hard money for, and it's not being used, what is the point?’ he fumes. ‘If it doesn't have any practical value, they should disclose that upfront: 'This is not the widely used FICO score.’”
So, next time you take a look at your credit score to determine your eligibility before applying for a loan, make sure it’s your FICO score, because that’s what matters to lenders.
“If you know where to look for them, you can buy the equivalent of FICO scores on the three bureaus' Web sites. TransUnion calls it a credit score, Equifax calls it a FICO score and Experian calls it a Plus Score.”
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