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Score Disclosure Notices: Not Viable for Tracking Your Score Over Time

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As I recently blogged, lenders are now required to supply potential borrowers with their credit scores if they are denied credit or offered less favorable terms because of those scores, thanks to credit score disclosure rules that became effective July 21st. If you’ve applied for credit since then, you may have already received a letter with your score as part of the lender’s meeting their risk based pricing notification obligation or—unfortunately for you, their adverse action notification obligation.

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I have heard some people thinking they can leverage these score disclosure notifications as a means (at no cost) to track their credit score’s migration over time.  Unfortunately, these notices should not be used for that purpose as the results would be misleading.  There are several reasons why this is the case.

Three Bureaus, Three Scores

Most of the time the lender pulls your credit report and score from only one of the three national credit reporting agencies (Equifax, Experian and TransUnion) when you apply for a loan.  The exception tends to be for mortgage related loans where all three credit reports and credit scores are accessed.  Each lender has their own criteria and rules to determine from which credit reporting agency they will access the report and score.

As such, if you have received several score disclosure notices from different lenders, they are likely accessing the credit score they disclose to you from different credit reporting agencies.  Your credit score can be different across the credit reporting agencies when the underlying data housed on you at the credit reporting agency is different.

So you should not assume the 680 score within your first notice has increased if the score shared in the second notice is 710 for example.

[Related: New Rules Increase Free Access to Credit Scores]

Different Scoring Models

There are different scoring models that lenders use.  The two most commonly used broad based risk scores are the FICO score (may be referenced as BEACON in your score disclosure letter if the lender used Equifax) and the VantageScore.  These scores have different score ranges – FICO scores generally range between 300-850 while VantageScores range between 501-990.

So you should not assume the 680 VantageScore within your first notice has decreased if the FICO score shared in the second notice is 670 for example.

Different Versions of the Same Scoring Model

To complicate matters even more, there are different versions of the FICO and VantageScore models available for lenders to use.  Similar to how there are multiple versions of Microsoft operating systems in use, there are multiple releases of the credit scores lenders can access and use.  The score developers periodically update and enhance their credit scoring systems and lenders then determine if and when they will migrate to a newer release.

So you should not assume the 680 FICO version “X” within your first notice has stayed the same if the FICO score shared in the second notice is also 680 — but calculated from FICO version “Z” — for example.

[Related: CFPB Study: Consumers, Lenders Not Looking at Same Credit Scores]

While these score disclosures do not provide you with the opportunity to track your score over time, they are valuable. They provide transparency on how lenders evaluated your request for credit and provide insights into the credit score the lender used so that you can understand where you rate and take action to increase your score if needed.

Image by mollycakes, via Flickr

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