Conflicting credit scores cause confusion
When you buy your credit score, it's almost certainly not the same number your mortgage lender will see.
Your lender might see a lower score, or even one calculated on a different scale. It means you could apply for a loan thinking you deserve a low interest rate, but end up paying a higher one because your score wasn't as good as you assumed.
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. One Bankrate reader complained to financial advice columnist Dr. Don Taylor that she bought her credit scores from two of the big three credit bureaus as part of her search for a mortgage, only to discover that the scores were based on a scale that, from her standpoint, misleadingly pumped up her creditworthiness.
She thought she was buying a FICO score, developed by Fair Isaac Corp., and used by almost every lender in the mortgage business. Savvy consumers know that the FICO score is on a scale of 300 to 850 -- the higher the better -- and that certain scores serve as dividing lines between subprime (high-rate) borrowers and prime (lower-rate) borrowers.
She had really bought her 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. The woman had a VantageScore of 668, which made her think she was a prime mortgage customer. But it turned out that her FICO score was 574, casting her into the subprime category.
It's as if she turned on the radio, heard it was 32 degrees outside, put on a coat and stepped out, only to find that the temperature was 32 degrees Celsius -- about 90 degrees Fahrenheit.
Bad news for others
She wasn't the only person who got a nasty surprise. Another Bankrate reader, who asks to be called "Bob from New Hampshire" because he doesn't want everyone to know his credit score, says he recently bought a VantageScore and it was 754. Soon after, he discovered that his FICO score was 681 -- a most unwelcome surprise. (He says he quickly boosted the FICO score 20 points after paying off a credit card.)
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.'"
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.
By Holden Lewis • Bankrate.com http://www.bankrate.com/brm/news/mortgages
Your lender might see a lower score, or even one calculated on a different scale. It means you could apply for a loan thinking you deserve a low interest rate, but end up paying a higher one because your score wasn't as good as you assumed.
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. One Bankrate reader complained to financial advice columnist Dr. Don Taylor that she bought her credit scores from two of the big three credit bureaus as part of her search for a mortgage, only to discover that the scores were based on a scale that, from her standpoint, misleadingly pumped up her creditworthiness.
She thought she was buying a FICO score, developed by Fair Isaac Corp., and used by almost every lender in the mortgage business. Savvy consumers know that the FICO score is on a scale of 300 to 850 -- the higher the better -- and that certain scores serve as dividing lines between subprime (high-rate) borrowers and prime (lower-rate) borrowers.
She had really bought her 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. The woman had a VantageScore of 668, which made her think she was a prime mortgage customer. But it turned out that her FICO score was 574, casting her into the subprime category.
It's as if she turned on the radio, heard it was 32 degrees outside, put on a coat and stepped out, only to find that the temperature was 32 degrees Celsius -- about 90 degrees Fahrenheit.
Bad news for others
She wasn't the only person who got a nasty surprise. Another Bankrate reader, who asks to be called "Bob from New Hampshire" because he doesn't want everyone to know his credit score, says he recently bought a VantageScore and it was 754. Soon after, he discovered that his FICO score was 681 -- a most unwelcome surprise. (He says he quickly boosted the FICO score 20 points after paying off a credit card.)
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.'"
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.
By Holden Lewis • Bankrate.com http://www.bankrate.com/brm/news/mortgages
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