Know About How To Get Real Credit Score
In order to calculate your real credit score, you need to be able to have two very important pieces of information data and a formula for credit scoring. When it comes to the data, it generally comes from the credit bureaus such as TransUnion, Experian, and Equifax. Each bureau happens to take into account certain factors such as an individual’s bill-paying habits, late payments, credit limits, credit utilization, inquires, and more to compile this data.
Once this data is obtained, one needs a formula that is primarily provided by the FICO aka Fair Isaac Corporation. There also exist other competing formulas as well. But FICO’s formula is the one which is widely used by the majority of lenders.
Now, the real reason why credit scores tend to vary. It is because of the information in your credit file varying from one credit bureau to the other. Does this mean they are not real? No, they are absolutely real and you can count on them. However, when you are applying for a loan or a mortgage it is hard to say which particular credit score will be taken into account.
Why does this happen?
Well, one reason could be for instance you having a bank loan or a car loan; that doesn’t happen to report to all the three credit bureaus. It might be very much possible that a creditor may simply report to just one or two of them. Therefore, in this case, only one might have the information, while others might not. The second reason is the fact that there happen to exist in multiple credit scoring formulas. This is why even FICO has several different scoring formulas of their own as well.
Some lenders may happen to choose to use the version of the formula. Which is newest whereas others may want to keep sticking to older versions. It needs to be kept in mind that it usually costs lenders a lot of money to update their particular systems with the latest formula from FICO formula
Lastly, in some cases, it has also been found that a few lenders and industries have their very own customized versions of the formula provided by FICO. For example, the FICO formula which is used on your credit file when you tend to apply for a home loan might be very much different from the formula which is used when you happen to apply for a credit card.
So this is why even if the exact same data is taken into account by the credit bureaus. There still happen to be variations in the credit score because of the multiple formulas that exist. As a result, your lender might in most cases probably sees a credit score which is a lot different from what you might have obtained via one of the credit bureaus.
Bottom Line :
This brings us to the end of our discussion on knowing how to get the real credit score. Now, do let us know some of your personal thoughts on the same.
