Too many Credit Scores

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Were you surprised when you found out that the credit score you have just pulled up on the internet is different from the credit score that was pulled up by your lender. Why are they different? Which is real?


Well, here is the truth, BOTH OF THEM ARE TRUE...


Confused? Well, we have just found out that we do not have only one credit score rather, we have HUNDREDS of credit scores.


How is this possible?

Basically, a credit score is created to determine lender's risk to do business with you. A credit score helps the lender determine if you are eligible for the financing you apply for. It numerically projects how well you take care of existing lenders and if you are worthy of their risk as well as what terms should they offer to you, if approved.

Some of the factors that will determine your credit score are past transactions, your total credit balance and some of your public details. They will use a credit score model to determine these factors and will assign a score to you.


So why are there several credit scores? Well, the answer is simple, because of the credit scoring model.


Aside from the fact that there are different companies providing credit scores, an update of the credit scoring model is released yearly. However, this does not mean that the old ones are no longer used. No, there are some companies that still use the outdated version of the credit scoring model.


There are two types of scoring models:

a. Generic - are the credit scoring models that you see and used on the internet. It is usually for the purpose of the consumer.

b. Specific - the models that are used by the professionals: the mortgage lenders, auto lenders, credit card issuers, insurance companies, etc.


You can use generic credit scoring models to help you develop a feel for what is being reported. However, no matter what model or brand you depend on, as long as you remain consistent with your payments, you should have no future problem with your credit reports.