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Borrower Beware – All Credit Scores Are Not Alike

Your credit score is a numerical gauge of your ability to payback loans. Anytime you want to borrow money or get credit, the lender will look up this score to determine the risk involved in lending to you. The higher the score the better, so if you get a credit report and see a high score that means your credit is good, right?

Not necessarily so. The fact is there are several different credit scoring methods. Credit scores calculated from the same credit reports can differ substantially from credit scoring method to credit scoring method. So how can you ever know what your credit score really is? Well, luckily, 75% percent of lenders use FICO scores exclusively and you can purchase FICO scores yourself–you just have to know where to go.

FICO credit scoring was developed by Fair Isaac and Company as a numerical method of determining your credit worthiness. The scores range between 300 and 850 and are basically based on your past bill paying performance.

It would be easy if everyone used this scoring system, but the three major credit bureaus each have their own version of the FICO score: Equifax uses the Beacon system, TransUnion uses the Empirica system, and Experian uses the Experian/Fair Isaac system.

Althought they all use slightly different systems, all systems are based on the original FICO scoring method so generally your score should be equivalent from each. Of course, some lenders may also use their own scoring methods as well.

There is only one place where you can get your FICO score from all three bureaus and that is at http://www.myfico.com. If you order your credit score from anywhere else, again be aware that these scores are “FAKOs” (or “fake”) and can differ considerably from your FICO credit scores.

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