Credit Scores Vary Between Bankers

Why do credit scores vary within a short time from banker to banker for the same individual?

Discrepancy in FICO Score Pulled by Banks vs. the MYFICO Site Scores

FICO scores are the scores that most bankers use when assessing the risk of a potential loan applicant. When a banker pulls credit scores they usually get a merged credit report showing all three credit bureaus (Experian, Trans Union, and Equifax), as well as three FICO scores, each one representing the risk of the consumer related to information on each bureau. Most bankers use the middle score number as the basis for calculating the price of the loan.

What is unknown in most cases is FICO scores come in many variations. There are actually 53 different FICO scores. Since the myFICO site has recently settled a 4 year rift with Experian allowing consumers to buy all three FICO scores, we are getting many complaints that the scores pulled by bankers are sometimes different. Because there are many versions of FICO scores a lender may have an older or newer version of the FICO score which could cause a difference in the score pulled at the consumer site. The newer version of the FICO score is the 08 version as opposed to the 04 and 98 versions.

Besides the different models, there are also varied brand names of the model used by each of the credit reporting agencies. For example, the 08 version is called FICO Risk Score Classic 08 for Trans Union, Beacon 09 for Equifax, and Experian calls it Experian/FICO Risk Model v08. These brand names are listed on the merged report pulled by the banker. There are many reasons why banks might use different models or generations of the FICO score. Some don’t want to spend money on implementing the new version and others may still be evaluating whether they will approve it.

In addition to the different versions of scores causing variations, discrepancies in scores can occur if information changes on credit in between the first pull by the consumer at the FICO site and when the banker pulls credit. For example, if a credit card balance was updated on credit hours after an individual pulled reports and scores from the FICO site, there could be quite a difference when the bankers merged report is generated later on with the update. When the banker gets the tri-merged credit report and score from the pulling service the scores could vary 10-100 points depending on what balance to limit ratio the individual had prior to the update. The same goes for closing an account or new accounts being updated to credit. Changes of information on credit can cause drastic or small score differences. Although the FICO site is not guaranteed to be the same, it is a good indication of where the scores are.

Example
 Jack went to Banker 1 on Monday morning to get pricing on a mortgage and had the banker pull his credit scores. His scores were a 735, 745, and 742, which means the banker would take the middle number as a base. This number would be a 742 which is great since Jack needed a 740 middle score to get the best rate and pricing on the 800k refinance he needed. On Thursday Jack went to Banker 2 to shop pricing on the same loan and his scores were a 700, 702, and 701. Jack was shocked and didn’t understand why his scores dropped so much. Upon deeper investigation it turns out a new credit card had been opened by Jack and was not yet updated on his credit Monday. By the time the 2nd banker pulled his credit the bureaus had updated the newly opened Visa card. The new account reduced his average age of credit therefore making it younger and dropping his score.

Example
 Samantha went to her banker to get a pre-approval letter to help her shop for real estate. The pre-approval letter was necessary since it is highly competitive in the NYC market where she was planning on purchasing. Samantha had a credit score of 780,760, and 772 leaving her with an excellent middle score of 772. Samantha went looking for a property and found one within 2 weeks. She had an accepted offer and went to apply for the loan. She decided to use a different banker who had to re-run her credit. To her surprise her credit scores were 710,715, and 720. The significant decrease was due to a large increase on her credit card balances. Samantha owns an art gallery and uses her personal credit cards for her business. She had some large purchases and was almost maxed out on her balance-to-limit ratio of the only two credit cards she had. This action decreased her scores dramatically. Although she had made the charges on the cards when the first banker pulled her credit it hadn’t been updated to the bureaus for another week. It would make sense for Samantha to build business credit and not use her personal credit cards for business purchases.

Example
Allen had his credit score reviewed by Bank 1 on Tuesday morning and his scores were a 680,687, and 685 which worked well with the loan he was applying for. That afternoon he went to a different banker and his scores were 670, 677, and 675 which caused a difference in his loan. Bank 2 used a different model of the FICO score than the first banker and that was the reason the scores varied within hours.

These are just a few examples of score variation within a short period of time. Scores can also drop and rise due to new third party inquiries as well as third party inquiries dropping off credit. Third party inquiries impact scores for one year and remain on credit for two. Another factor could be delinquencies. If a consumer has a new late payment scores could drop hundreds of points from one day to the next.