When numbers don’t add up

When you buy your credit score, it’s almost certainly not the same number your mortgage lender will see.

Your lender might see a lower score or even one calculated on a different scale. It means you could apply for a loan thinking you deserve a low rate, but end up paying a higher rate because your credit isn’t as good as you assumed.

Confusion arises because consumers and lenders often see different credit scores. As if that didn’t create enough misunderstanding, the three parties involved view credit scores from different perspectives:

•Consumers buy their credit scores to find out if they’re going to be eligible for the lowest rates or if they’ll have to pay higher subprime rates.

•Lenders use credit scores to estimate how likely the borrower is to make late payments.

•Credit bureaus sell credit scores to consumers to make money and teach people how to improve their credit profiles.

When these viewpoints clash, consumers get frustrated.

One Bankrate reader complained that she bought her credit scores from two of the big three credit bureaus, only to discover that the scores were based on a scale that from her standpoint misleadingly pumped up her creditworthiness.

She thought she was buying a FICO score, developed by Fair Isaac Corp.and used by almost every lender in the mortgage business. Savvy consumers know that the FICO score is on a scale of 300 to 850, the higher the better, and that certain scores serve as dividing lines between subprime, high-rate borrowers and prime, lower-rate borrowers.

But she had really bought her VantageScore, which was jointly introduced this year by the three big national credit bureaus: Equifax,Experianand TransUnion. The VantageScore is based on a scale of 501 to 990. If any mortgage lenders use it, they don’t talk about it.

The woman had a VantageScore of 668, which made her think she was a prime customer. But it turned out that her FICO score was 574, casting her into the subprime category.

If you know where to look for them, you can buy the equivalent of FICO scores on the three bureaus’ Web sites. TransUnion calls it a credit score, Equifax calls it a FICO score and Experian calls it Plus Score.

Bureaus are expected to increase their marketing efforts for the VantageScore, and they say there’s good reason: It’s easier for the consumer to understand, and the bureaus use it as a teaching tool.

Rod Griffin, manager of public education for Experian, says VantageScore buyers are shown an explanatory Web page, “There’s the scale – A, B, C, D, F,” Griffin says.

Someone with a VantageScore in the 600s can see that “a 601 to 700 is a D by letter grade,” Griffin says. “What a D means is it’s a subprime or nonprime score, and those people fall into the bottom 38 percent of the population.” The Web page explains that lenders are likely to offer D scorers “somewhat less favorable terms to compensate for higher default rates in this category.”

Meanwhile, people in the mortgage industry say there’s no chance that home lenders will adopt VantageScore. They will stick with the FICO score because it has proven accurate.

“With billions and billions of pieces of data, it’s becoming more and more refined with each transaction,” says Dan Green, mortgage planner with Mobium Mortgage in Chicago. “How is the industry going to turn its back on that?”

Contact the writer: E-mail Holden Lewis at

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