Have you ever checked your credit online, maybe through CreditKarma or Experian, and then when you go to the bank to try to get a loan, the lender comes up with a different score? Why is that?
I’ll tell you why. Because the banks and the credit bureaus are using two different systems to generate your score. I’ll make this short and sweet. The banks are using the FICO system which we’ve talked about before and the credit bureaus are using their own system called the Vantage Score.
You’re probably wondering why they use different systems. You can learn more in this video but to keep it simple, they can choose what they want to use!
For example, let’s say you’re doing some work on your MacBook and you get the notification that says you have an update available. So what do you do? You install the update. Now, right next to you is your colleague working on a MacBook as well and they get that same notification. Rather than installing the update, they click “Remind me later”. You’re both still working on the same computer, but you’re using different versions. There’s nothing wrong with that!
It’s the same with these credit generation systems. Each company has their own models and it really doesn’t matter which one they want to use but as a result, the credit score they come up with may be different.
Now that we’ve covered that, you’re probably thinking, well why does it show different scores on the credit bureaus websites who are supposedly using the same system?
So, Susan is applying for a new job at a financial company that requires a background and credit check. The financial company pulls her credit which counts as an inquiry on her credit report. She then goes to check Transunion and sees that her credit score is sitting at 650 after the inquiry. The next day, she goes into Equifax and sees that her score is at 645, which is what Transunion showed before the inquiry. That’s simply because Equifax isn’t pulling from the same information that Transunion is.
Look – just because these credit bureaus are using the same algorithm to generate your score, does not mean they all pull the same information. Some may show inquiries, while others don’t. Some may show collections, while the others don’t.
So, what’s the point here? Your credit score is going to look different depending on which company you’re pulling it from and the credit generation system that company is using. Banks are going to use FICO 95% of the time so if you’re wanting to check your eligibility for a loan based on your credit – always confirm you’re looking at your FICO score.
Look, I have plenty more tips and tricks in my book 3 Paths of Lending. You can get your copy here – Drop an emoji in the comments if you already have it.
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