Since the start of 2017, the Consumer Financial Protection Bureau (CFPB) has cracked down on all three credit bureaus for deceiving consumers with the credit scores that they were paid to provide. The credit scores that were provided to consumers were said to be the same credit scores that were issued by lenders. This claim was actually false and fines totaling in the millions were levied against Experian, TransUnion and Equifax. All three credit bureaus actually issued credit scores to consumers based on their own proprietary scoring models, which are considered “educational” credit scores that are not typically used by lenders for determining credit worthiness.
The tremendous disparity between consumer purchased credit scores and scores automatically provided by credit card companies has lead many consumers to believe their credit scores are actually higher than they are. Most consumers do not realize that there are actually hundreds of different credit scoring models out in the marketplace today and the range of scores seen from one scoring model to the next could be great.
Greater than ninety percent of lenders today use the Fair Isaac scoring model, but even less known is that FICO actually has eight different versions and lenders are required to use different versions of FICO with each of the three credit bureaus when a tri-merge credit report is issued.
When planning to apply for credit, first be sure your credit report is accurate. Consumers can obtain a free copy of their credit report (not scores) from Annualcreditreport.com once per year.
Once you receive your report, be sure to review it for accuracy. When you decide to apply for a mortgage, your loan officer should be able to confirm your true FICO scores and review your report with you.
For more information and tips to improve your credit scores, be sure to check out this post – Credit 101
For more information from the CFPB regarding credit scores, see the official CFPB report and website below.
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