Reader Question: Which credit score do lenders use?
Posted by Joe on June 3rd, 2008
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Q: Which credit score do lenders use? Do they use an average of all of my credit scores or use some other method?
A: The short answer is that the Fair Isaac score, more commonly know as the FICO score, is the most common score used by lenders such as credit card companies, mortgage lenders, auto dealerships and landlords.
However, the answer really isn’t as simple as one dominant score. In fact, there are nearly as many different credit scores as there are lenders. The reason is that most major lenders use custom lending criteria to establish your credit score based off of the type of loan you are trying to qualify for.
These custom credit scoring criteria are essentially complex calculations that take into account various aspects of your credit history as they relate to the type of credit you are attempting to secure. For example, an auto loan company is very likely to create custom scoring criteria that weighs your history with auto loans more heavily than other items on your credit report. The same goes for credit card companies, mortgage lenders and other financial companies.
Most of the time these custom scoring criteria are based off of the FICO scoring methodology. In some cases, business may use a methodology based off of the one of the major credit bureau scores individually or as a group with what is called the Vantage score. This score was created by the the three credit bureaus to compete with the FICO score but is used far less frequently in lending decisions.
So, your FICO score, which you can receive free when you sign up for a free trial of Equifax credit monitoring service, is typically the best indicator of the score that a financial lender may use to make credit decisions about your creditworthiness.
The exception is when an individual or business is attempting to use your credit score to determine your overall financial health and character. This may occur when you are renting a house or apartment or applying for a new job. In these cases the individual pulling your credit file will likely be more interested in the negative items on your credit report rather than the actual score.
In either scenario, it is a good idea to check with the potential lender or creditor to determine which type of credit score they base their decisions on and get access to that score. You can learn more about services that will provide you with access to credit report and credit score information by visiting our credit report service comparison.
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June 26th, 2008 at 9:07 am
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