Reader Question: Credit Score Confusion
Credit scores can be confusing — and for good reason. Here’s a reader question that illustrates exactly that:
I’ve always had “excellent” credit. Last Friday I bought a new car, and in the financing process it came up only “fair” — nearly 100 points below what I expected. Naturally, the interest rate on my new car was not as good as I thought it would be. But today, my quarterly credit report (which I get through American Express) came in the mail, and the rating from all three credit bureaus was “excellent”, in the range I expected.
I called the finance guy at the dealership, and he said he didn’t understand why my rating came up as it did. He implied that AmEx’s process may be calculated differently than the one they use, and that they use a monthly update as opposed to whatever AmEx uses, but he said they get it from Equifax ,and Equifax is one of the three I got today — and it gave me the highest number of the three. Have you run into this before?
A little bit about credit scores
What most people don’t realize is that there’s no such thing as “your credit score”. Instead, there are a huge number of scoring methods out there that each calculate scores in different ways. There are two general types of scores that you may be familiar with: FICO® scores and a VantageScore®. There are also many, MANY “flavors” of scoring models out there that you probably wouldn’t recognize.
No matter what scoring model is used though, they all have three things in common:
- They all describe a point in time (the moment at which the score was calculated)
- They all use statistics and specially-selected factors to calculate risk
- And they’re all based on information about you, which is usually found in your credit reports
Back to the reader question
The question is basically this: Why was my score lower at the dealer when I got my car loan than it was on the paperwork I got from American Express?
There are several things I can think of that could explain that. Your Equifax score from Amex could be a VantageScore, which is typically just used to give consumers some idea of what their credit may be like.
Or, your Equifax score from Amex could in fact be a FICO score (which is what’s often used) but it might not be the same Equifax FICO score that the car dealer pulled. (Because there are multiple ones of those, too.)
Even if the the same type of FICO score was pulled both places, it would vary slightly depending on what dates they were run, because your score changes often. 100 points is a huge variation though, so I doubt that.
The last possibility is that they somehow pulled a different person’s score instead of your own, but that seems the least likely. I would get more info from the dealer, confirm their score is really for you, and if the one from Amex is NOT a VantageScore, then get a free copy of your credit report to be sure there are no errors.
What about you? Have you ever experienced something similar?