Are you applying for a mortgage loan in the new future? If so, checking your three credit reports is an important step to help you prepare for the underwriting process. And while the credit reports you view online will largely contain the same information as the reports your lender pulls, your credit scores may be another matter entirely.
Imagine the following very common scenario: You pull your credit reports and credit scores online to review them prior to filling out a mortgage application. However, when you apply for the mortgage and the loan officer pulls your credit data, those scores do not line up with the ones you saw online.
The Purpose of Credit Scores
To understand why your different credit scores can vary so widely, it may help to first understand what credit scores are designed to do. Credit scores are purchased by lenders to help them assess the risk of doing business with you. FICO and VantageScore credit scores, the brands used most commonly by lenders, are designed to predict the risk that you will become 90 days late on any credit obligation within the next 24 months. The higher your risk, the lower your credit scores will be.
Many Different Types of Credit Scores
Credit scores are not a built-in part of your credit reports. Instead, they are an add-on product used to evaluate the information contained in your credit reports. There are multiple score brands, generations and types of credit scores available for lenders and consumers to purchase or claim.
Naturally if you check a different credit score brand, generation or type than your lender checked, the numbers are not going to match. And even if you checked identical score brands, generations and types across the different credit bureaus, the numbers are not going to match.
The two most popular brands of credit scores on the market are FICO and VantageScore. In the mortgage world, FICO is the common brand of credit score, primarily due to requirements imposed by the GSEs (Fannie Mae and Freddie Mac).
On the other hand, VantageScore is currently the most popular credit score in the consumer website market. When you check your scores online through a variety of websites, you will most likely be viewing some version of your VantageScore credit score.
In addition to different brands, there are different generations (think 1.0, 2.0, 3.0, etc.) and different industry specific types (think auto, mortgage, bankcard, etc.) of credit scores as well. And, to make it really complicated, you have three different credit reports and they are certainly not identical. Naturally if you check a different credit score brand, generation or type than your lender checked, the numbers are not going to match. And even if you checked identical score brands, generations and types across the different credit bureaus, the numbers are not going to match.
It’s no secret what information on your credit reports is considered by credit scoring systems. It hasn’t changed in decades. There are only subtle differences between the categories of information considered by the FICO and VantageScore scoring models.
FICO’s credit score factors and their relative contribution to your score
- Payment History: 35 percent
- Amounts Owed: 30 percent
- Age of Credit: 15 percent
- Mix of Account Types: 10 percent
- New Credit: 10 percent
VantageScore’s credit score factors and their relative contribution to your score
- Payment History: Extremely Influential
- Age and Type of Credit: Highly Influential
- Percentage of Credit Limit Used: Highly Influential
- Total Balances/Debt: Moderately Influential
- Recent Credit Behaviors and Inquiries: Less Influential
- Available Credit: Less Influential
Despite the score factors being similar, they can be weighted differently. For example, a credit report that has zero late payments might earn you a certain number of points under a FICO scoring model but a different number of points under a VantageScore scoring model. Still, if you maintain good credit management habits, your credit scores will likely be in good shape regardless of the brand, generation, or industry type of credit scoring model being used.