did you know no credit score can guarantee to be the one your lender uses

Did You Know? No credit score can guarantee to be the one your lender uses

Date: June 24, 2020

Some people believe, incorrectly, that a credit score is only valuable if it’s the same brand, model version, and indeed the exact same three-digit sequence as the score your prospective lenders will see. Here’s why they’re mistaken:

There are hundreds of credit scoring systems in commercial use by lenders, insurance companies, collection agencies, utility companies, and tenant screening companies. As a result, the chances you’ll obtain a score generated by the same model used to screen your next application are almost zero.

There are two primary types of scoring models in commercial use today: credit bureau risk models and custom scoring models.

Credit bureau risk models are exactly what the name suggests—credit scoring models marketed by the three national credit reporting companies (CRCs), which consider only the information that’s on your credit report at the time your score is calculated. There are roughly 70 of these scoring systems commercially available and in use today, including the VantageScore 1.0, VantageScore 2.0, and VantageScore 3.0 scoring models.

Custom scoring model is a broad term that encompasses any scoring system designed and developed for use by a single party, like a lender, or a smaller group of similar parties, like a pool of insurance companies. Almost every mid- to large-sized lender or insurance company uses many different custom scoring models to help in making decisions. Custom models often use scores generated by credit bureau risk models, such as VantageScore, along with information supplied by the loan applicant, such as income, employment history, and personal assets, to evaluate the applicant’s likelihood of defaulting on a loan.

So in fact there is no one score used in banking, insurance, or any other industry. Instead, hundreds of scoring models are used across multiple industries. Because so many models are in commercial use today, it is highly unlikely that any one score a consumer could buy or obtain for free will be derived from the same model, using data from the same CRC, that a prospective lender will use when evaluating a credit application.

What’s more, even in the unlikely event that a score you obtain from a website or credit card statement is produced by the same version of the same model, using data from the same CRC as the one your lender uses, it’s still very unlikely that the score you receive will be the same one your lender gets. The only way to ensure that would be to perfectly synchronize your loan request with the one from your lender, so that scores are calculated at exactly the same instant. That’s because your credit file at each CRC is continually updated, and factors such as the age of your oldest account change each day so that your credit score will naturally fluctuate over time.

No matter what you may read around the blogosphere, no credit score model can promise it will provide you the same three-digit score that a lender will see the next time you apply for credit.