Credit monitoring: The credit score you get might be different than lenders receive

Credit monitoring: The credit score you get might be different than lenders receive

real-estate-creditSubscribing to a credit monitoring service to keep tabs on your credit score can be a helpful way to manage and protect your credit.

But did you know that the score you purchase isn’t always the same as the one the lender obtains from a credit reporting agency?

That comes as a surprise to many borrowers. But the real questions are why is this the case and what can you do about it?

Both credit monitoring services and credit reporting agencies make money by selling credit reports. You can buy an educational credit score from a credit monitoring service when you’re planning to apply for a loan, to manage your debts or to reduce the risk of identity theft.

Lenders, credit card companies and landlords buy credit reports from credit reporting agencies to help predict whether you’re likely to pay your bills on time and/or default on your payments.

There are two main reasons these scores might be different: 1) different scoring models, and 2) different methods of reporting.

Scoring models

Each agency calculates your credit score in a different way, based on statistics or a proprietary algorithm. As a result, it stands to reason that the scores can be different.

Credit providers buy three types of scores from credit reporting agencies: 1) generic scores to evaluate general payment performance; 2) industry scores to predict performance on a specific type of credit; and 3) custom scores, which predict performance by the company’s customer base.

Credit monitoring agencies use generic credit scores to educate you, help you make improvements to your credit and plan for the use of credit in the future.

An industry credit score applies only to your credit performance in a certain industry. That means that the score associated with whether you have paid your car loan in a timely fashion might differ from the industry score related to your performance in paying your mortgage. For example, if you always pay your car loan on time but have missed mortgage payments, it will affect your numbers.

Some lenders also have their own method of calculating a custom score that ranks you in comparison to their overall customer base.

Creditors can choose what information to report to which agencies and when.

Reporting methods

There are several common ways that reporting methods can cause differences among your credit scores.

The credit providers delivering the data might not give the information to all credit reporting agencies, or they might provide the same data but on different schedules, which can easily lead to differences in your reported scores.

Also, if you change your name or address, the new information has to be matched to the right file to ensure accuracy.

Essentially, creditors can choose what information to report to which agencies and when. While some lenders report monthly to all three agencies (Equifax, Experian and TransUnion), others might report only once per quarter or only when there is new activity on your account. Still other lenders only report to a single credit reporting agency. In addition, the reporting agencies don’t share information with each other, which means the score you buy may not be derived from the same information as the score obtained by the lender.

There’s nothing you can do about what credit score you or the lender will obtain at any given time. What you can do is pay attention to the information in your credit file and make sure it stays updated and accurate.

If you have a common name, confirm that only your own information appears in your credit report. Make sure there are no duplicate items in your report, and if you dispute anything, contact all three credit bureaus.

In Massachusetts, the law requires an attorney to facilitate in the conveyance of real estate, and it may be helpful to have legal counsel at each step of the purchase and sale, from negotiations to making an offer and conducting a title search.

In a residential real estate deal, it is important to make sure that the seller is conveying clear and marketable title, which means that there are no defects or liens that cloud the title being conveyed. Additionally, it is important to know about any encumbrances on the property, such as easements that may affect how you use the land. Easements provide their holders with nonpossessory stakes in property. Call us today at 781-331-3811 to discuss how we may assist you in your next transaction.

Massachusetts Real Estate Law, Real Estate, Real Estate Law

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