credit score

Getting Clarity on Credit Scores

This post is brought to you by guest blog writer Tony Markland with Alcova Mortgage.

Credit scores often have consumers (and sometimes lenders) scratching their heads and saying “How did they come up with THAT?”

The one you hear about the most are FICO scores (an acronym for the Fair Isaac Corporation, the creators of the FICO score). It’s the one that most mortgage lenders use as one of the benchmarks to see if you qualify to refinance or purchase another home. Usually 3 scores are provided and the lender uses the middle score as the basis for granting (or denying) a loan.

Oddly, FICO scores may vary from lender to lender. Why? Because over the years, Fair Isaac has updated their credit scoring model software (best estimate about 85 times), but the credit bureaus who buy the software from Fair Isaac do not always update their own software. One lender could be using the latest version while another lender’s model is several years old.

However, not everyone uses FICO scores as a guide. Here are some other credit scoring models that are used:

  • Auto Loans: If you apply for an auto loan through a dealer, the dealer uses its own credit scoring models, which are completely different from those used by lenders.
  • Insurance Companies: The insurance premium you pay for homeowners or auto insurance also depends on the credit score model that insurance companies use. And it will vary among different insurance companies.
  • Vantage Scores: If your occupation requires you to be “licensed” (especially in the financial services industry,) and if and acceptable credit score is a requirement to obtain or maintain your professional license, Vantage Scoring model software is used.

Free Credit Reports: According to law, you are entitled to one free credit report (per bureau) every year. While it won’t be exactly be what lenders see when they order a credit report on your behalf, it will be “in the range” and is a good indicator of what to expect.

Go to and request a credit report from EACH of the bureaus listed.

A word of caution: be careful when signing up for offers to provide you with a FREE credit report. If you are asked to enter your credit card number, what you are really signing up for is a credit monitoring service—that may cost you over $300 per year.

Knowing the differences in various credit reports and reporting agencies may assist you in your search for a home mortgage or other loans. And as always, please contact Tony Markland with ALCOVA with any questions you may have, or visit the ALCOVA Mortgage Education Center to watch some quick videos on all aspects of the lending process.

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