I noticed in a discussion in the Bankruptcy section that Tthere seems to be a little bit of confusion sometimes concerning bureaus, scores, and terminology.
Here’s how the system works. There is no such thing as an Experian, Equifax, or Transunion score per se. The bureaus do not create credit scores, they simply provide a record of your credit behavior. The scores are created by applying a credit scoring algorithm to a bureau’s information.
The problem is that each different algorithm assigns a different weight to the various factors, things like pubic records, collections, average age of accounts, revolving utilization, installment utilization, inquiries, number of accounts, mix of credit types, length of time since something negative, and God only knows how many other things. The consumer, of course, wants to know the score that a creditor is going to use to make a decision, but, for example, your Experian report on a certain date will have one score if the score was created with a specific FICO algorithm, and a different score if it was created by a Vantage algorithm.
Right now, consumers can find their scores that are created by, for the most part, two systems, FICO and Vantage. There are others, but you or I aren’t likely to run into them. The score nearly all lenders are interested in is the FICO score. The others, including Vantage, are often referred to as FAKO scores, not because they aren’t real scoring algorithms, but because creditors don’t use them. In fact, the FCPA went after Equifax and Experian for marketing the Vantage score as a score that you could rely on, and they paid millions in refunds and fines.
Many free sites, like Credit Karma, provide a FAKO score , usually Vantage, instead of a FICO score. This can be useful in seeing if your score is trending up or down over time, but the actual score will not be what a creditor uses. In fact, in most cases, the Vantage score will be higher than the FICO, making you think it’s time to apply for something when it really isn’t.
Different creditors will pull different reports, Experian, Equifax, or Transunion, and some will even sort of rotate, using, say, Experian one time and Transunion another. Generally, creditors are most likely to pull Experian, next most likely Equifax, and least likely Transunion. But that’s a generalization. Before actually applying for something, you should ask which one they’ll use. Note that all 3 are pulled for mortgages, then they use your middle score.
Once you know which report the creditor will be puling, you need to know which score they’ll pull. You can rely on it being the FICO score, but which one? There are a lot of FICO scores, about 60 of them. FICO has 6 different versions, and within those there are specialized sub-editions, tailored for specific kinds of lending, with each of the different FICO scores giving different weight to different aspects of your credit history. But most of those 60 scores are used at a commercial level, not for consumers. Neither you nor I need worry about, for example, a FICO score tailored for major construction equipment lending.
The scores that will affect us are the basic FICO 2, FICO 3, FICO 4, FICO 5, or FICO 8 . Right now, the most used by creditors in general is FICO 8, but there’s a new FICO 9 and eventually creditors will probably switch over to that. Also, many mortgage lenders use the FICO 2.
Again, that’s all generalization, and a certain creditor might or might not use the FICO 8. I once hit one of my bank’s interest rate drop points, 680, with my Experian based FICO 8 . Knowing they always pulled Experian, I went in to refinance a car loan. Only to discover that while they did pull Experian, they pulled the FICO 2 for all their credit, loans, credit cards, whatever, and my FICO 2 was almost 30 points lower. The FICO 2 was seeing a certain account as revolving, while the FICO 8 saw it as an installment account. Adding that account’s balance into the calculation, my revolving utilization was above 40%, devastating my score, while my revolving utilization as far as FICO 8 was concerned was only 24%. So even with FICO scores, just which one is being used makes a difference in your score, sometimes a large difference.
In summary, if you want to know what score a creditor will be basing credit decisions on, you need to find out whether they’ll pull Experian, Equifax, or Transunion, then you need to find out which FICO score they’ll pull. If you cannot get that information (sometimes the people on the phone just don’t know), check your Experian based FICO 8, because, overall, that’s the one they’re most likely to use and ypu'll have a good chance of seeing the same score that the creditor will. But keep in mind that they might just be using a different bureau and/or a different FICO version and the score you have might not be the same one the creditor uses.
