Many consumers are “often confused as to where their credit score comes from,” reports John Ulzheimer, president of consumer education at SmartCredit.com and Bottom Line newsletter contributor.
When these consumers hear the term “FICO credit score” they often think that the company Fair Isaac, the company behind FICO, creates their credit score.
Ulzheimer says this is a “common misconception.”
Fair Isaac “does not calculate anyone’s credit score,” states Ulzheimer, “It simply developed the software that is used to calculate credit scores and licenses its software to the three credit reporting agencies: Equifax, Experian and TransUnion.”
Although all three credit reporting agencies use FICO scoring software, each tends to produce slightly different FICO credit scores.
Ulzheimer says each of these agencies compiles its own credit history for each individual and inevitably misses certain credit accounts and events.
This can leave the consumer even more confused and wonder which of the three scores they should care more about.
It’s important to consumers because the score can determine whether you get a mortgage, auto loan or credit card with attractive terms.
As a former employee of Fair Isaac and Equifax, Ulzheimer knows the inside workings of the credit reporting industry.
He says for a consumer applying for credit, “it depends on which of the three credit reports a lender happens to check. Only mortgage lenders check all three.”
While many consumers have the ability to obtain a non-FICO version of their credit score through various Internet websites, those “scores are rarely checked by lenders.”
In fact, a home mortgage borrower who needs to know quickly his or her credit scores and to receive an accurate interest rate and monthly payment calculation for a new home purchase, should contact a Paramount Mortgage banker.
Courtesy Paramount Mortgage
