Consumers applying for credit are sometimes surprised to find out the credit score they have been monitoring is different from the credit score the lender uses to evaluate their credit application. This happens because there are many different credit scoring models.
The most widely used scoring model, developed by Fair Isaac Corporation in 1989, is the FICO score. Over the years, many different versions of FICO have been developed and marketed to lenders. The most recent version is FICO 10.
In 2006, the 3 major credit reporting agencies – Equifax, TransUnion, & Experian- developed the Vantage score. The most recent version is Vantage 4.0.
Financial service companies may choose to subscribe to any scoring model or version. For instance, a lender can continue to use FICO 8 instead of FICO 10 or go with the Vantage brand. A company can also develop their own scoring model to evaluate borrowers.
Years ago, the credit bureaus focused on selling their scoring models to lenders. A consumer could be denied easy access to their credit reports and scores. In 2003, the Fair Credit Reporting Act was amended to require annual access to free credit reports. In subsequent years, federal law and market changes prompted lenders to provide consumers more access to credit scores.
Today, a consumer has a variety of opportunities to get a free credit score. Credit card companies, credit bureaus, and many web sites offer free credit scores. Another recent trend, companies marketing alternative scores to consumers who do not use credit. These alternatives track things like rent payments and are not as widely used by lenders.
The best strategy is not to fixate on a particular a score. Rather, monitor the general way your score is trending. Understand that the data in your credit report feeds all the scoring models. That data is most important because a “right” score for all situations does not exist.
You can get free credit reports at www.annualcreditreport.com These reports will not include a credit score. However, reading your report will help you better understand the factors that impact your score. Currently, the credit bureaus are offering access to free reports 1 time per week as opposed to 1 time per year