A 'True' Credit Score

Finance experts bless the benefits of periodically reviewing your credit report. Truth be told credit reports are so important that Federal law requires the three major credit agencies to make reports available to consumers for free.

Consumers can also obtain their credit scores by joining credit, monitoring, or identity theft protection services. These services have a problem--the credit score that a consumer receives is not always the same score lenders receive when evaluating an applicant for credit.

There are several potential reasons why scores may vary:

1. Educational Scores: The scores consumers purchase are often what the CPFB calls "educational scores." While these scores may provide consumers with some indication of how potential lenders will view their credit worthiness, educational scores vary from the industry standard FICO score.

2. Industry Scores: Even if a consumer purchases his or her FICO credit score, it may vary from industry specific FICO scores. Not all FICO scores are the same, and certain industries (e.g., auto and home loans) use variations of the FICO scoring formula designed specifically for those industries.

3. Custom Scores: As if educational and industry scores were not confusing enough, some of the larger industries use custom formulas specific to their business. These scores typically start with a FICO score, and then make adjustments to the score based on a proprietary scoring formula known only to that company.

4. Credit Reporting Agency Variations: The three major credit reporting agencies generally have different information on file for each individual in their databases. As a result, even if the same scoring formula were applied to the data on file, the credit reporting agencies would typically generate different credit scores based on the information they have on file. As a result, a consumer purchased credit score would likely vary from what a lender sees if the scores are generated from different credit reporting agencies.

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