Why Is My Credit Score Different When a Lender Pulls It?

Credit scores can be confusing. In fact, ever since the notion of credit scores was created, there has been confusion about how these three little numbers are calculated, and what they mean. The funny thing though, is that most of the confusion is self-inflicted. In other words, the credit score war between various credit reporting agencies has created the confusion.

FICO, the old credit score calculation standard, has been under attack from a deep-pocketed upstart called Vantage® Score. Vantage is an LLC owned by Experian, Equifax, and TransUnion. Vantage made the situation worse when they started with a credit score range that was 200 points higher than the standard FICO score. The good news is that Vantage did see the error in their ways, so when they released version 3.0, they adopted FICO’s 300-850 score range. That change helped improve customer understanding of what a good credit score was. However, with all the free credit reports available to consumers (each with different scoring methodologies), it’s possible the credit report you pull may contain different numbers than the report your lender will use to determine your creditworthiness. I know what you’re thinking – “Why is my credit score different when a lender pulls it?”

Here are four things to consider:

1. If consumers went to annualcreditreport.com to get their credit score, they would receive a Vantage credit score. Even if they receive a Vantage 3.0 credit score, the calculation method is still different from FICO. Even if both reports were pulled at the same time, it is highly unlikely the two scores would match.
2. Most people don’t realize their credit score changes daily, or even on an hour-to-hour basis. It all depends on when their information is being reported from the creditors to the repository. If a consumer accessed their credit report twice within a matter of 24-48 hours, the credit score would be substantially different.
3. Another reason your credit score could be different than what the mortgage lender pulls is that you could be looking at a single-merge (on score) credit report. Mortgage lenders are required to look at a tri-merge (three score) credit report. While your report could show one very good score, it may not show the other two scores, which could be higher (or lower). The mortgage lender is required to use the middle score of these three numbers. Unless consumers are also looking at a three-repository report, they have no idea what their middle score is.
4. The fourth reason why consumers have a different credit score from their mortgage lender is that even if they have a FICO score, it may not be the same FICO score as the lender’s. As of today, FICO has more than 56 different credit scores with different ranges – some are 300-850, while the FICO auto-score (the one typically used for auto loans) has a range of 200-900. The FICO auto-score has no relevance to the mortgage process.

I expect to see some of the biggest changes in the credit scoring industry this year when Fannie and Freddie start to incorporate trended credit data. Stay tuned to future Updates.