Why is the credit score from the bank lower than the score I get directly from the three credit reporting agencies and FICO.com?
Answers | 4
Ralph - thanks for the question. The credit reports that consumers can obtain will vary from the lender-generated reports due to the different scoring models that the systems use. Often, this variance can be quite large. If you are working on obtaining a new loan, the best piece of advice is to connect with a lender and ask them to pull and provide a copy of a tri- merge (all 3 bureaus) report so you know these lender report scores.If you are only interested in checking your credit history , the systems you mention are likely fine to review the specific accounts, payment history etc., but not the scores :) Thanks.
David is correct, the scoring models for "consumer pulled" reports are vastly different than those on lenders' reports. They can be an indicator which way you're headed (if you were 740 last month and now you're 640, something changed!), but that's about all those "Credit Karma", etc scores are valuable for.
The Real Reason is that the banks manipulate your data in order to charge you as much interest as possible and make the most profit. When applying for a credit card, they want your score as high as possible so you qualify for more credit at a low rate which they can raise at a later date, when you have a higher balance. When applying for a mortgage, they want your score to be as low as possible so you don't qualify for a low fixed rate. Banks use a different formula to interpret your FICO score in order to achieve this, especially the larger banks, who would rather not tie up their money in risky long term private home loans anyway.
Depending on the individual bank and whether or not that financial institution portfolio their loans, the bank in all likelihood is using an older legacy FICO scoring model. There are roughly 6 variations for each individual credit bureau (Equifax, TransUnion, Experian).