Your credit score is not what you think
What a mess!
That's the short version of the credit score picture captured by the Consumer Financial Protection Bureau in its study released this week of credit reporting agencies.
This is an industry that touches nearly every aspect of our financial lives, from the vehicles, houses and credit cards we own to the jobs we qualify for to the rates on our home, auto, health and life insurance.
It might surprise you that the credit score you pulled up from that website promoted by the catchy rock band might not be anything close to the one the guy across the table from you is using to determine whether to loan you money. In fact, the CFPB says it probably won't be.
"When a consumer purchases a score from a (credit reporting agency), it is likely that the credit score that the consumer receives will not be the same score as that purchased and used by a lender to whom the consumer applies for a loan," the report reads.
How come? Here are a few reasons:
- You unknowingly purchased what is called an educational score. Lenders don't use those.
- You and the lender obtained your credit score from different credit reporting agencies.
- Your lender uses a different scoring model than the one you obtained.
- You pulled your credit score at a different time than your lender.
- You and your lender used different identifying information when you obtained your credit score from the same credit reporting agency.
Geez, good to know there are only five ways my home or auto loan could go sideways!
Turns out (wait for it) there is no such thing as a "true" credit score anyway.
"Believing he or she had purchased a FICO score may lead to dissatisfaction upon learning otherwise," the report reads. "The consumer may be frustrated to learn that they cannot know exactly how a creditor will view them."
Kinda explains why I couldn't close the deal on that unicorn the other day.
But wait! We've only covered the accidental obstacles to your loan. The report also raises the specter of "substantial differences between the scores sold to consumers and those sold to lenders."
This, the report concludes, could lead to such high jinks as consumers settling for less-favorable loan terms, not bothering to apply for a loan for which they would qualify, or applying for a loan under the mistaken impression they do qualify, "leading to disappointment, wasted effort, and unnecessary inquiries on a credit report, which could depress his or her score further."
Thanks for the eye-opener, CFPB.
Can you lend a brother a dime?
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