What Is My Real Credit Score?

If you care about your credit, then you know your credit score can have a huge impact on what you pay in interest for credit cards, mortgages, personal loans and more. Beyond that, a credit score will likely determine whether or not you qualify for a loan to begin with. It’s no wonder that more and more people want to check their credit scores, and that there are an increasing number of places that offer free credit scores (Credit.com is one of them).

But what happens when the free score you get online is different from the one your lender or insurance company uses? Are those free scores real credit scores? Are they worth paying attention to?

The key to these questions is nailing down what a “real” credit score actually is. Is it the version of the FICO score a mortgage lender would use if you applied for a home loan today? Or is it the version used by a card issuer to evaluate your application for a new reward card? Or the one the cable company uses to decide whether you must put up a deposit before getting service? Because those scores are all being used to make actual decisions – and they most certainly will be different.

Then there is the question of which bureau’s credit report should be used to calculate this “real” score. If the underlying data in your three credit reports is different — and it usually is — the resulting number will vary.

As for newer scoring models like VantageScore, they may not be as widely used as FICO scores, but does that mean they don’t count? If lenders are using those scores then isn’t it worthwhile for consumers to know about them as well?

To top it all off, FICO will be coming out with a new version of the FICO score in the summer of 2014. But not all lenders will adopt it right away, if ever. Which version of the FICO score, then, is the “real” one? There are literally hundreds of different types of credit scores used to make lending decisions.

Yes, this is a crazy, complicated set of issues and it’s no wonder consumers get upset.

Some have suggested that consumers be provided with a “real” score when they obtain their free annual credit reports. Some legislators have felt the same way. But when these legislators try to figure out which score should be shown to consumers, they run into the same obstacles I’ve just described.

In 2010, Sen. Mark Udall (D-Colo.) tackled this issue by proposing legislation that required lenders to provide consumers with the score that was used in a decision where a consumer’s application was rejected or they were charged more based on a score. The number that is now shown to consumers as a result of this legislation is indeed a “real” score in the sense that it must be the score actually used to make the decision. But again, the actual score that is distributed will vary, depending on which model the lender used for that application.

What’s the Solution?

It’s natural to want certainty and to know exactly what your credit score is, but for all of the above reasons, it’s simply not possible to nail it down to one single number.

However, there is something consumers can do, and this is where the “easy part” comes in. The main factors that affect your credit score are consistent among various scoring models: payment history, debt, age of credit history, types of credit and new credit/inquiries. There are some variations among the various models in terms of how they treat specific items within those factors: some versions of the FICO score ignores collection accounts where the original balance was less than $100 and VantageScore 3.0 ignores paid collections, for example.

Nevertheless, for the majority of consumers, if you score well on all those factors under one scoring model, you should fare well under others. That’s why it’s important to understand the factors that are directly impacting your credit scores.

Ultimately, consumers can’t control which credit scores a lender or insurer will use. But with the exception of unforeseen events like a catastrophic illness or long period of unemployment, most of us can control how we manage our credit going forward. Pay on time, pay down debt and shop strategically for credit and you can be confident you are on the right track, no matter which scoring model a lender uses.