Heads Up - Lenders Use Different Credit Scores

It is not an unknown fact that many people apply for loans grinning and confident of their credit scores, only to be disappointed because they didn't get the loan, or they got the loan at a much higher interest rate. Now what are we missing?

But answer this question: how many credit scores do you have? If you answered one, you're wrong. There are actually different credit scores being used by lenders. Yes, even FICO scores have different variants and generations. And depending on the type of loan, lenders will use different variants of the same credit scoring system to determine the borrower's risk of default. Lenders use a different credit variant for mortgages, installment loans, and auto loans.

These credit score variants and generations are not available for consumers, so even if you score high in the credit score report you bought from the credit bureaus like Experian and TransUnion, you may still get disappointed. It's really a simple case of apples to oranges. The credit scores being sold to consumers are not the same credit scores that lenders, landlords, insurers or even employers use.

Most lenders, however, use a version of the FICO score, so it's best to buy a FICO credit score report. However, don't be surprised if your lender pulls out a different score from the one you have.

The Different Flavors of FICO

There are different FICO scores for auto lenders, credit card companies and other lenders. And there are also different generations of FICO. The problem is that each time Fair Isaac, the company that developed the FICO scoring system, issues a new version of its scores, lenders react differently to them. While some will implement it right away, while other prefer to be loyal to the old ones.

So what is available for lenders is a whole menu of different credit scores, and consumers have no clue which of them is being used by their lender. The only FICO scores available to consumers is the FICO score for mortgage lenders.

Find more information on more auto loans and other information on http://www.lenderstalk.com