Credit Score

20% of Consumers Get Different Credit Scores Than Lenders

September 27, 2012 by Credit.com 0 Comments

When consumers seek a line of credit, they may be fairly confident that they know where they stand with regard to their rating, but this might not always be the case.

Anywhere between 20 and 27 percent of the time, credit scores consumers see are meaningfully different than the credit scores lenders use, and that can cause significant problems for would-be borrowers, according to a new study from the federal Consumer Financial Protection Bureau. The result of these discrepancies between what a consumer might see when they order a copy of their credit score, and what a lender might see, is that a potential borrower might be under mistaken impressions of what they can actually qualify for.

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For instance, those who believe their credit ratings are better than they actually are may be put in a position where they continually apply for financing for which they are unqualified, and therefore have an even more negative impact on their score because of the number of hard inquiries processed in a short period of time, the report said. On the other hand, those who think their scores are lower than what they are in reality may end up qualifying for a line of credit that isn’t as beneficial or affordable as what their real standing shows they deserve.

The inherent problem with these differences in scores consumers and lenders can each see is that the borrower is more likely to not know about where they actually stand, the report said. The CFPB therefore recommends that all potential borrowers take the time to order a copy of their credit report prior to seeking a new line of credit, and check it closely to make sure there are no errors having an adverse effect on their rating. Further, they should also try to shop around as much as possible for any line of credit they’re seeking, so that they can more fully understand the costs of the offers available to them, and also identify the one that may afford them the best possible deal.

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The CFPB has made significant strides in attempting to make the credit markets safer for consumers in general, by working to clarify lending agreements and enforce policies that promote fairness in lending.

Image: Iragerich, via Flickr