Why Your Credit Score May Differ From the Lender's

Why Your Credit Score May Differ From the Lender's

Before applying for a loan, it’s a good idea to check your credit report and score to see where you stand. However, it’s unlikely that the credit score you see will be the same one your lender uses to assess your creditworthiness. However, lenders use specialized scores that are calculated differently depending on the type of loan, even though both scores are probably accurate.

Although you won’t be able to see exactly what the lender sees due to this, it’s still a good idea to review your credit report and credit score to determine whether you should improve your credit further before applying. However, don’t set your sights on a particular interest rate or even on a loan approval guarantee based on a credit score you bought online. Remember that lenders take other factors into account in addition to your credit score when you use the score to determine your overall credit rating.

Credit Scores Used by Lenders

Your credit score was an educational credit score that was provided by the credit bureaus or another third-party provider solely to give you a perspective on your credit standing. Lenders do not actually use these scores to approve your application. This information is disclosed in the disclaimers of credit score services.

Additionally, it’s likely that you bought a generic credit score that applies to a variety of credit products. For the type of credit product you’re applying for, lenders and creditors use more specialized industry credit scores. For instance, auto lenders frequently rely on a credit score that more accurately assesses your risk of defaulting on a loan for a vehicle. A score created specifically for mortgage loans is used by mortgage lenders. Additionally, your lender might make use of a custom credit score created exclusively for that business.

The FICO score is used by many lenders, but even the score you get through myFICO might not match what your lender sees. Some lenders use VantageScore as well, but their implementation varies from yours.

It is possible that the lender will use a score that is different from the one you provided by a few points, which could be enough to prevent you from receiving the best interest rate or even having your application rejected. The most popular FICO industry scores are yours to access when you order your credit report and score from myFICO. The lender’s perspective on your credit score will be best represented by this.

Discrepancies in credit reports

The information in your copy of your credit report may differ from the information in your lender’s copy for two typical reasons. There are three major credit bureaus, so your report is available in three different formats. Additionally, information might have changed between the time you requested your report and the time your lender requested it.

It’s a good idea to keep an eye on all three reports in case there are any minor discrepancies between your credit reports from the three credit bureaus. A significant discrepancy is frequently a warning sign that demands immediate attention.

They are Equifax, Experian, and TransUnion, the three credit bureaus. Although they are all gathering the same data about your credit history, there may occasionally be very slight differences between the various reports. The information might not be the same if, for instance, you obtained a copy of your Experian report while your lender is looking at your TransUnion report.

Significant variations might also be explained by changes to your credit report. If it has been a few days or weeks since you last accessed your credit report, information may have changed due to changes in the data. There will be discrepancies due to different data in the two reports if the lender’s credit score is based on one credit report and the one you pulled is based on another. It’s also possible that all three of your credit reports contributed to the score the lender is using.

Mandatory Disclosures

A lender is required to send you a copy of your credit report and score if they reject your application or approve it on less favorable terms due to your credit score.

When you apply for a mortgage, the lender is required to give you a copy of the credit report that was used to determine your eligibility for the loan.

Keep in mind that your credit report is the foundation of your credit score. Check each of your credit reports to make sure the information is accurate before applying for a loan. Before you apply for the loan, make sure your credit is in the best possible shape by paying off any past due amounts and errors.

Questions and Answers (FAQs)

How can your credit score be viewed?

Everyone is entitled by federal law to check their credit report with each major credit bureau once a year. These reports can be ordered online or by calling 1-877-322-8228. Although you might have to pay for those services, you can also use third-party credit monitoring services to keep tabs on any changes to your credit score.

When a lender checks my credit, will my score drop?

Your credit score might go down after a lender checks your credit, but as long as it’s just one check, the harm won’t be too severe. Although some lenders only run a soft check that has no impact on your credit, you should generally anticipate lenders running a hard credit inquiry. If you submit a number of applications to lenders at once and they all run hard credit checks, your credit score will suffer noticeably.

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