When is your credit score not really a credit score? If you pulled a consumer credit report from one of the three bureaus, chances are it is not your actual credit score.
Credit bureaus collect information on you from your creditors to establish your credit file. Each credit file is a record of your payment history and use of credit. The credit bureaus have various methods for calculating your credit score. The traditional method is using a FICO based scoring model to assign a score. Fair Isaac Corporation is the developer of this FICO risk scoring model. Credit bureaus each use a version of this model to supply lenders with a score on each consumer. However, they also use a different scoring model to supply you with a credit score from the same credit file.
Credit bureaus do not want you to know exactly how your score is calculated. They release only general guidelines about how to improve your credit score. One way that they preserve this uncertainty is to provide you with a score based on a different calculation than they provide your creditors.
If that sounds confusing or unfair, the credit bureaus have announced even more changes. VantageScore is a new scoring model that was developed through close collaboration between the three main credit bureaus. Unlike their previous scoring models, they have committed to sticking with one common formula for calculating your credit score. This however means one same formula used by all three without modification for the purposes of calculating your credit score to provide to lenders. They will also supply a separate consumer product that will use a common formula.
If this sounds confusing, then try this simpler explanation. Instead of 3 consumer scores and 3 lender scores for each consumer, you now have 6 consumer scores and 6 lender scores. With VantageScore, you now have 2 credit scores at each credit bureau. Lenders also can choose between 2 different credit scores on each person.
Keep in mind that the credit scores that you can pull are nothing more than a consumer product. They are an indicator of what your credit score could be, but it is likely different. In some cases, your actual credit score can be 15 points or more off from the score that lenders see. This does not mean that you should ignore your consumer credit score. You do however want to be aware of this variance in case you walk into a loan application thinking your credit score is higher than it actually is.
Kenneth Long has over 5 years experience helping clients learn about credit and ways to correct debt problems. He has assisted a number of nonprofit organizations with their credit and debt programs. He serves as a regional coordinator with the North Carolina Saves statewide campaign. He also teaches a number of classes on budgeting, saving, credit and debt.
