Discrepancies In Your Credit Score

Why Is There a Discrepancy Between My Online Credit Score and What My Lender's Credit Score Is?

When you're preparing to buy a home, you might check your credit score online and feel confident about your financial standing. However, you might be surprised to find a discrepancy between your online credit score and the score your lender provides. At Gervais Mortgage, we understand how confusing and frustrating this can be. Here, we'll explain why these differences occur and how you can better prepare for the mortgage application process.

Understanding Credit Score Models: VantageScore vs. FICO 8

VantageScore and FICO 8 are two of the most widely used credit scoring models, but they evaluate your credit information differently.

FICO 8 Score:

• Created by the Fair Isaac Corporation (FICO).

• Used by mortgage lenders.

• Scores range from 300 to 850, with higher scores indicating better creditworthiness.

• Emphasizes payment history, amounts owed, length of credit history, new credit, and credit mix.

VantageScore:

• Developed by Experian, Equifax, and TransUnion. Shown on online accounts.

• Also ranges from 300 to 850.

• Weighs credit behaviors differently than FICO, being more lenient on isolated late payments and placing more emphasis on trends and recent credit activity.

Key Differences Leading to Score Discrepancies

1. Scoring Factors:

   • FICO 8 places more weight on payment history and amounts owed. VantageScore might consider the depth of your credit history and recent credit behavior more heavily.

2. Late Payments:

   • FICO 8 is stricter about late payments, particularly recent ones. VantageScore can be more forgiving if the rest of your credit profile is strong.

3. Credit Utilization:

   • Both models evaluate credit utilization, but FICO 8 may penalize you more for high utilization rates.

4. New Credit Inquiries:

   • FICO 8 tends to negatively impact your score more for multiple recent credit inquiries than VantageScore.

Why Your Scores Differ Across Credit Bureaus

Your credit scores can vary across the three major credit bureaus—Experian, Equifax, and TransUnion—due to several reasons:

1. Different Data Reporting:

   • Not all creditors report to all three bureaus. Some might report to only one or two, leading to variations in the data each bureau has.

2. Timing of Updates:

   • Creditors update your information at different times, causing temporary discrepancies between reports.

3. Different Scoring Algorithms:

   • Each bureau might use slightly different versions of the scoring models, resulting in variations even when using the same score type (e.g., VantageScore or FICO).

4. Errors or Omissions:

   • Mistakes or missing information on your credit report can also cause score discrepancies. Regularly checking your reports for accuracy is crucial.

Why These Differences Matter for Your Mortgage Application

Lenders often pull credit reports from all three bureaus and may use a specific model (such as FICO 8) to make lending decisions. Understanding the differences between VantageScore and FICO 8, as well as how your scores might vary across bureaus, can help you:

• Better Manage Your Credit: Knowing how different actions might impact your score differently in each model can help you make smarter financial decisions.

• Prepare for Your Mortgage Application: By checking your scores and reports from all three bureaus, you can address any discrepancies or issues before applying for a mortgage.

At Gervais Mortgage, we are committed to helping you navigate the complexities of the mortgage process. If you have any questions about your credit score or need assistance with your mortgage application, feel free to contact our team of experts.

Understanding these nuances can help you better manage your credit and improve your chances of securing favorable mortgage terms.

For personalized advice, reach out to the Gervais Mortgage team today!