Why does my credit vary so much between the credit score a lender pulls and the credit score I get from my credit card or free online credit tracking app?
As consumers, we have access to credit scores by many means, from: apps, free tacking from bank account or credit card companies, free yearly credit reports from the government and mortgage credit reports. With so many different sources, a common question is why does credit score differ with every system used?
There are essentially two types of credit reports that are commonly generated: the Mortgage credit report and the Consumer credit report.
A mortgage credit report is a report pulled by a mortgage company that is considered a hard inquiry and generates typically 3 credit scores.
A consumer credit report is a credit report that is pulled by either a consumer or a company that may be offering credit on a consumer level. This includes car loans, credit cards, personal loans, etc. This may be a hard inquiry as well. It may report three scores or less.
Mortgage credit reports typically look for different aspects of debt management versus consumer credit reports, which are more focused on consumer goods/history and behavior. The differences can be very significant, with circumstances ranging up to 50 points between the mortgage credit report and the consumer credit report.
Free monitoring systems, which include apps, credit cards, bank accounts, etc track credit differently than getting a consumer credit report. This is due to the way they obtain information. Typically, they obtain their information through what is called a soft inquiry. This soft inquiry will not give them a credit score, they are only given raw data. These companies then attempt to mimic the credit score model to attempt to come to their own credit score to offer their clients.
Lastly, credit is very fluid. Swings of 30+ points are possible depending on spending habits for a particular month or two and when they actually report to the credit bureaus. In addition, when a revolving account that is typically paid off at the end of the month reports the highest balance to the bureaus, the bureaus then calculate a lower credit score due to this higher balance. This may not be a good representation of credit should the habit shows continuous liquidation of balance month after month.
When getting pre-approved for a Santa Cruz home loan, always make sure you are getting your credit report and score from by a mortgage company offering mortgage credit report services. This will confirm that the scores are valid to obtain a mortgage loan.