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Q&A with FICO on why credit scores differ

QuestionWhat's the difference among the newer versions of FICO scores?

AnswerEvery few years, we redevelop each of the bureau's scores using new data and any new nuances we developed in our predictive method and so forth. And by looking at new data and new techniques of predicting, we can better predict how a consumer will pay in the current economic environment.

While most of the same factors are looked at, the points can vary for a particular action. If you're late on a payment, (and) if you're using the newest version of the Equifax FICO score, for example, it may impact you differently than if you're using an older version of the score. The points are going to change. In some cases, the factors are going to change.

In this case, if we're in the same bureau, we're just talking about different models within that bureau's scores. We're not talking about differences in data. You can be looking at the same credit report we're talking about and get different scores. It's basically different formulas are creating different scores. They're all similar and they all use the same range of 300 to 850. And they're all adjusted so that a lender can use the same cutoffs in evaluating those scores.

So, if a lender requires, say, a 760 score for the best mortgage rate, for example, that 760 will represent the same level of risk to that lender, whether they are getting it from the most recent version, an older version of the score or one of the industry scores. A lender doesn't have to worry about the version they are using. They can be assured that the score will be assigning the same level of risk even though some different information went into it.

QuestionHow are these credit scores different from the ones consumers have access to?

AnswerThe scores that are available on myFICO and the Equifax FICO score, for the most part, those are the same scores that lenders are using in many cases. We found in 2010 (that) U.S. lenders bought roughly 4 billion FICO scores that were calculated from the same models as offered on myFICO.com. So while the scores that myFICO sells are not the ones that all lenders use, you're either going to get the ones that lenders use or they are going to be very close. They may be off from one version to another. But when you get other scores from other websites, then you're talking about non-FICO scores that for the most part are not used by lenders. They're used to provide consumers with an idea of how they stand credit-wise.

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