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Refinance and Credit Rating Impact - The Bills.com Blog
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Refinance and Credit Rating Impact
Thursday, Apr 5, 2007
Question: My scores are 859 with Trans, 808 with experian and 643 with Equifax. Why such a variance and how do lenders view do they average the 3 numbers which is then AV 770. I am trying to re-finance so how often do they update their scores.
Answer: There are two primary reasons why the same consumer can have different credit scores with each of the three major credit bureaus. The first reason is that the three bureaus use similar, but not identical, formulas for calculating a credit score based on the information in your credit reports. The second is that each of your three credit reports can contain significantly different information about your credit history. With each credit bureau using a different formula to calculating your credit score using different data, it is no wonder that the results can differ significantly.Quickly, however, if you are looking to refinance, many of Bills.com's approved lenders will take your best score... so you can apply by following this link:
Mortgage Refinance
Now, back to your credit. There are several popular credit scoring models used by the credit bureaus, developed as proprietary formulas by various companies. Some of the most popular are CreditXpert, PLUS (developed by Experian), and, the most well known, FICO (developed by the Fair Isaac Corporation). While each of these models looks at the same basic aspects of your credit history, slight variations in how different factors are weighted mean that,
even when based on the exact same credit history information, the resulting scores can vary by 50 points, or more. The variance caused by scoring models could easily account for the difference between your Transunion and Experian scores. However, the difference in scoring models should not result in a variance of almost 200 points, as seen with your Equifax score.
The large variation in credit score among the three bureaus indicates to me that, in addition to using different scoring models, the three credit bureaus are likely showing different credit history information on your credit reports. It is quite normal for the bureaus to report some different information from one another, but usually the information is not so different to cause a 200 point difference. It is very possible that Equifax is reporting incorrect information on your credit report, such as the delinquent accounts of someone with a similar name, which could account for your low score. I encourage you to carefully review the information on all three of your credit reports to make sure that everything appearing
The large variation in credit score among the three bureaus indicates to me that, in addition to using different scoring models, the three credit bureaus are likely showing different credit history information on your credit reports. It is quite normal for the bureaus to report some different information from one another, but usually the information is not so different to cause a 200 point difference. It is very possible that Equifax is reporting incorrect information on your credit report, such as the delinquent accounts of someone with a similar name, which could account for your low score. I encourage you to carefully review the information on all three of your credit reports to make sure that everything appearing
on the reports is accurate. If you find any incorrect or unknown listings, you should dispute them with the credit bureau showing the inaccurate data.
Lenders are aware of the potential problems that can result from differences in the scoring models and information used by the different bureaus. Therefore, many mortgage lenders use your middle credit score, in your case the 808 score from Experian. This fact should counteract the negative impact of the low score with Equifax, but I still think you should review your reports to figure out what information is causing the Equifax score to be so much lower than the other two. Again, if you find any inaccurate information, each credit bureau has a process for disputing inaccurate information, which can usually be done online. The Federal Trade Commission offers a helpful guide to disputing items on your credit reports, available at www.ftc.gov
For more information about credit scoring, credit reports, and how they affect you, I encourage you to visit the Bills.com Credit Resources
I hope this information helps you Find. Learn. Save.
www.bills.com
Lenders are aware of the potential problems that can result from differences in the scoring models and information used by the different bureaus. Therefore, many mortgage lenders use your middle credit score, in your case the 808 score from Experian. This fact should counteract the negative impact of the low score with Equifax, but I still think you should review your reports to figure out what information is causing the Equifax score to be so much lower than the other two. Again, if you find any inaccurate information, each credit bureau has a process for disputing inaccurate information, which can usually be done online. The Federal Trade Commission offers a helpful guide to disputing items on your credit reports, available at www.ftc.gov
For more information about credit scoring, credit reports, and how they affect you, I encourage you to visit the Bills.com Credit Resources
I hope this information helps you Find. Learn. Save.
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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