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Color of Money

Can't Be Sure of Credit Status, Even With a Scorecard

By Michelle Singletary
Thursday, March 24, 2005; Page E03

Humorist Mason Cooley once said, "Every path to a new understanding begins in confusion."

That quotation applies to e-mails I received from confused readers who recently ordered their credit scores to gain a better understanding of where they stood.

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Read Michelle's Past Columns

In one case, a husband and wife paid for and got all six of their credit scores (one for each of them from the three major credit bureaus). The scores ranged from a low of 602 to a high of 712.

But when a mortgage lender pulled the credit scores not long after the couple did, some of their scores were significantly lower, ranging from 598 to 649.

"Why are our scores from the mortgage company different [from] the ones we pulled online?" the husband asked. "Shouldn't they be the same scores I pull from the three credit bureaus?"

A reader from Los Angeles wrote that his wife purchased her credit score online from TransUnion. The score she received was 864. Three days later, after applying for a home equity loan, the score the lender got from TransUnion was 775, a drop of 89 points.

"It doesn't seem plausible," the reader wrote.

There's nothing amiss here. Here's why.

Most of the credit scores you buy or get free online are not the exact ones used by lenders. The gold standard is what's called a FICO score, named after Minneapolis-based Fair Isaac Corp., which devised a mathematical model to predict the credit risk of consumers based on information in their credit report. FICO is the model most widely used by lenders.

Only in the past several years have consumers been able to purchase their credit scores, three-digit numbers that are generated using information from their personal credit files. The higher your score, the better credit risk lenders think you are. A high score often translates into better rates on the money you borrow.

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