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Credit Reports
Credit Score Types & Differences
Lenders use a number of different credit score programs to determine
what kind of risk you are. The best known credit score program
is FICO credit score (which was created by Fair Isaac). However,
there really are multiple versions of FICO and each can yield
a different credit score for the same person. In addition to FICO
there is CreditXpert, programs created by individual lenders,
and even scoring systems that have been created by the credit
reporting agencies themselves.
All of these systems can be used to predict your creditworthiness
and they all run off the same point basis. The scale generally
runs with a credit score from the mid-300s to a credit score with
the mid-800s. Your numbers may vary by up to 60 points from one
scoring program to another but your credit score should remain
in roughly the same range.
Slight variations in your credit score are caused by two factors
The Formula Used
Each credit scoring program uses its own weighting system on
primarily the same data that all companies use. In other words,
one company may weigh late payments into the credit score more
heavily than other companies might. In addition, some companies
have specific formulas for the type of credit being sought.
So, if you are applying for a mortgage, the credit score may
be different than if you were applying for a car loan. This
is, again, due to the amount of weight the scoring program gives
various aspects of your credit record.
Different Data
There are three different credit bureaus that maintain credit
records and each different credit bureau typically has different
information in your records. This is often caused by the different
information that the bureaus receive from creditors and the
time frame in which they receive it. So, if your credit score
was compiled based on your Equifax credit report it may vary
considerably from a credit score compiled from your Experian
credit report. For this reason, most lenders use the middle
of the three bureau credit scores when making decisions, especially
for mortgage lending.
If your credit score varies more widely than 60 points, check
your credit reports and make sure there are no errors. Often an
error can occur in one of your reports, causing your credit score
to be completely different. But one thing is certain. Your credit
score is very important.
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