Question: Why are credit scores different when they are pulled by consumers vs. when they're pulled by lenders?
Answer: There are a few reasons that the credit scores you see when you check on your own may vary from what a lender sees when evaluating you for a credit account. However, it's important to understand that these discrepancies don't necessarily mean that either set of scores is inaccurate.
It's a common misconception that every individual has a single, unique credit score that represents their level of risk when applying for new accounts. In reality, there's no limit on the number of credit scores that may accurately reflect your financial information and payment history. This is because individual consumer reporting agencies, credit scoring companies, lenders and creditors may use slightly different formulas to calculate your credit scores. They might also weigh your information differently depending on the type of credit account for which you've applied.
For example, let's say you're going to buy a house. When mortgage lenders review your credit history, it's likely they'll use a credit score formula tailored to determine what kind of risk you'll be for a mortgage loan. The formula may weigh pieces of your credit history differently in order to test for that risk factor. The same may be true if you apply for an industry-specific line of credit, such as a personal credit card or an automobile loan.
Your credit scores might also differ based on which credit reporting agency your lender uses. Since each agency independently determines your credit scores based on the information in their individual databases, there may sometimes be slight differences. Some lenders also only report to one or two credit reporting agencies, which means your credit history could look different from agency to agency. Additionally, your lender might be viewing a consolidated score that draws from all three credit reporting agencies or even using their own in-house scoring model.
When you check your own credit scores, on the other hand, what you generally see are educational credit scores, meaning they are intended to give you a close idea of your scores for informational and monitoring purposes. While they are a good way to gauge your credit rating, you may not be seeing the exact same numbers as your lender.
Another reason your credit scores might look different to lenders is because they were updated since the last time you checked. There is often a delay between when you make a payment and when credit reporting agencies factor that transaction into your credit scores. After you make a big payment — or do anything else that could substantially impact your credit scores — be sure to confirm that your information is being included on your credit reports properly so that lenders are seeing an accurate and up-to-date credit history.
Finally, although your credit scores may appear differently to lenders based on a variety of factors, it is still smart to check them yourself. By focusing on the key factors in your credit reports — such as payment history, credit card use and length of credit history — you can get a solid sense of your financial standing in the eyes of a lender.
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