Most lenders use FICO scores to screen loan applications. For that reason, obtaining your FICO scores reduce uncertainty caused by different judgments between you and prospective lenders.
Has the following situation happened to you?
You apply for a loan and you’re sure there will be no problem because you’ve pulled your credit reports. You even got credit scores from the 3 credit bureaus. But you are shocked to find that your loan is denied.
One of possible reasons is your credit score is not as good as you think. Some consumers have reported their credit scores were significantly less than their FICO scores. It means where we got our credit rating and what kind of score it is can make or break us.
FICO Credit Score and Credit Ratings
There are many credit scoring methods out there. This is the single reason the same credit reports may result in substantially different credit scores.
How do you ever know what your credit score really is? Luckily the majority of lenders use FICO scores exclusively and you can purchase FICO credit scores yourself.
FICO score rating is a numeric method of scoring creditworthiness, developed by a scoring company Fair Isaac Corporation. The range is between 300 and 850.
Your FICO score tells prospective lenders and creditors how likely you are to pay your bills. The higher the number, the better it looks to them.
The three major credit bureaus have their own credit score rating: Equifax with the Beacon system, TransUnion with the Empirica system, and Experian with the Experian/Fair Isaac system. Most of the credit ratings are derivations of the original Fair Isaac FICO scoring method.
Although most lenders use FICO score, some use one of the above credit scores or even their own credit ratings.
There is only one place where you can get your credit score from all three bureaus and that is at myFICO. If you order your credit score from anywhere else, be aware that these scores can differ considerably from your FICO credit scores.
The Non-FICO Credit Scores
Recently, Experian revealed that the national average credit score of its consumers is 678. This is very misleading to the average consumer. When you buy your credit report and score directly from Experian website, you are getting what they call the “PLUS Score,” which is NOT a FICO credit score, and is not used by lenders anywhere.
The 678 PLUS Score reported by Experian is actually the average of consumers’ PLUS Scores, not their FICO Scores. Clearly, the PLUS Score — and all Non-FICO scores — are useless.
Not only that, but such hype misleads consumers into purchasing their PLUS Score thinking that they are getting the same credit score that their lender will use.
Non-FICO scores are worthless no matter what any website selling non-FICO scores claim. Even a few points difference in your credit score can mean the loss of thousands of dollars out of your pocket — a loss that you probably didn’t plan for.
So, the next time you want the most accurate credit score, get the industry standard: the FICO credit score.