While keeping an eye on your credit report and checking your credit score regularly is a good idea, your credit score alone may not be telling you all you need to know. In fact some 96% of consumers have no way of knowing which credit score model potential lenders will be using, and that can make it difficult to determine the true value of checking their credit scores.
Just consider this – when you check your credit score you are given a numerical score, but that score is not necessarily the one potential lenders will be looking at. Creditors and lenders may use one of hundreds of credit score algorithms, and each of these credit score models uses a different system to determine credit risk.
If you doubt the truth of this scenario just consider the following example. A consumer – let's call her Suzy – goes online to check her credit score with Experian. Suzy is delighted to find that her credit score is a remarkable 900, so she goes ahead and applies for a mortgage on her dream house.
Suzy is in for an unpleasant surprise when her mortgage broker informs her that her credit score is only 690, and that she will be forced to pay a higher interest rate as a result of that lower score.
How could this happen? Actually it is quite simple. When Suzy checked her credit score she checked the Experian National Risk Model, while her mortgage broker obtained Suzy's credit score using the Experian/Fair Isaac FICO Risk Model. Each model uses a different method to assess lending risk, and this difference helps to explain the wide disparity in numerical credit scores.
The fact that there are literally hundreds of different credit score models, each using their own proprietary algorithms to determine the numerical credit score, means that consumers have to become more knowledgeable when it comes to checking and assessing their own credit scores. Just consider this list of some of the most commonly used credit score models and you will begin to see the problem.
| Score Model | Range | In use by | Developed by | Score group |
| Experian / Fair, Isaac Risk Model | 360 - 840 | Experian | Fair Isaac | FICO Score |
| Experian / Fair, Isaac Risk Model V2 | 300 – 850 | Experian | Fair Isaac | FICO Score |
| Experian/Fair, Isaac Advanced Risk Score | 150 - 950 | Experian | Fair Isaac | FICO NextGen Score |
| Scorex PLUS | 300 - 900 | Experian | Experian | Proprietary Model |
| National Risk Model | 0 – 1000 | Experian | Experian | Proprietary Model |
| National Equivalency Score | 360 - 840 | Experian | Experian | Proprietary Model |
| BEACON 5.0 | 300 - 850 | Equifax | Fair, Isaac | FICO Score |
| Pinnacle | 150 – 950 | Equifax | Fair, Isaac | FICO NextGen Score |
| New Account Model 2.0 | 150 – 950 | Trans Union | Trans Union | Proprietary Model |
| FICO NextGen '03 | 150 – 950 | Trans Union | Fair, Isaac | FICO NextGen Score |
| FICO Classic '04 | 336 – 843 | Trans Union | Fair, Isaac | FICO Score |
| Vantage Score | 501 – 990 | Equifax / Experian / TransUnion | Equifax / Experian / TransUnion | Vantage |
In addition to these popular credit score models there are literally hundreds of additional algorithms, all designed to help lenders more effectively determine credit risk before they lend money. With so many delinquent accounts already on the books, lenders are becoming more aggressive and more vigilant about assessing risk, and that means checking your own credit score may no longer tell you all you need to know.
When you check your own credit score online you may not always know which model is being used to determine that all important number. In many cases credit bureaus are not completely clear about the exact model they use, and that could leave you in the dark about what number potential lenders will see. Until you know which credit score model was used to determine your credit score you cannot truly know what your lender will see.
That is why it is so important to ask which credit score model your lender will be using before you check your credit score. Knowing which model will be used ahead of time is the only way to ensure that you and your lender are both on the same page.
In many cases determining which model will be used is as simple as calling the potential lender and asking which credit score model they will be using. In some cases it may take several phone calls before you find the person who knows which score will be used, but this perseverance will pay off in the end. After you know which credit score model the lender will be using you can check that score before you apply for a mortgage or other loan. Only after you have checked the appropriate score will you truly know the value of your credit score.
by Beconrad
