Solving Credit Score Problems

You go into a lender's office and you are prepared to apply for and receive a loan. You have done your homework, you have pulled your credit reports and you know what your credit scores are. You even got one score from each of the three major credit bureaus: Equifax. Experian, and TransUnion. But you’re shocked when your loan is denied, or maybe you were approved, but the interest rate is much higher than you expected. How can that be you might say? My credit score is good, I know I checked. Well maybe it isn’t as good as you think. It all depends on where you got it and what kind of credit score it is.

The fact is that there are several different methods for credit scoring. Credit scores calculated from the same credit reports may differ substantially from one credit scoring method to the next. So how can you ever know what your credit score really is? Well, luckily, 75% percent of lenders use FICO scores only and you can purchase FICO scores yourself - all you have to know is where to go.

FICO credit scoring is a numeric method for scoring your credit worthiness developed by Fair Isaac and Company. Your credit score will be a number between 300 and 850 that will tells creditors how likely you are to pay your bills. The higher the number is, the better it will look to potential lenders and creditors.

The three major credit bureaus each have their own version of the FICO score: Equifax uses a system called Beacon, TransUnion uses the Empirica system, and Experian uses the Experian/Fair Isaac system. Despite each credit bureaus' use of their own versions, all systems are based on the original Fair Isaac FICO scoring method, so every credit score calculated with these systems is generally called FICO score. However, although most lenders do use FICO scoring, some lenders may also have their own scoring methods.

There’s only one place where you can get your FICO score from all three bureaus and that will be at www.myfico.com. If you order your credit score from anywhere else, again be aware that these scores might be “fake” and can differ considerably from your real FICO credit scores.

Adding to the confusion are the credit bureaus themselves. Recently, Experian revealed that the national average credit score of its consumers was 678. This is very misleading for the average consumer. When you buy your credit report and score directly from Experian’s website, you will be getting what they call the "PLUS Score," which is not a FICO score, and isn’t used by lenders anywhere. (Equifax is the exception--you can buy your FICO score directly from them at their website; however, the only place to get all three scores together is only at www.myfico.com.) The 678 Plus Score reported by Experian is actually the average of consumers' Plus Scores, not their FICO Scores.

Clearly then, the Plus Score (and all Non-FICO scores) are useless. Not only that, but such hype misleads consumers towards purchasing their Plus Score thinking that they are getting the same credit score that their lender will use. Non-FICO scores are worthless no matter what the credit bureaus or any website selling non-FICO scores do claim. Even a few points difference in your credit score can mean confronting the reality of the loss of thousands of dollars out of your pocket--a loss that you probably hadn't planned for. The next time you want the most accurate credit score available, do yourself a favor and get the industry’s standard: the FICO credit score.

Article Source: http://www.debtfinancearticles.com.

About the Author:
Elliott Dawson is a contributing real estate editor at http://www.debtfinancearticles.com/. This article may be reproduced provided that its complete content, links and author byline are kept intact and unchanged. No additional links permitted. Hyperlinks and/or URLs must remain both human clickable and search engine spiderable.