Dealing with Competing Credit Scores
Consumers looking for access to credit are being subject to a gauntlet of confusing credit scores, and even more confusing explanations on why credit scoring is the way it is. As a real estate professional, explaining the differences between credit scoring models usually isn't on your list of value propositions for a potential buyer, but it soon may be.
Entire credit unions, banks, and lending institutions are changing the way they use credit scores. Some companies like Payoff or SoFi are using credit scores as a secondary risk analysis tool during the application process. Local and national banks are also converting to more aggressive scoring models, like the VantageScore, for consumer based lending, creating wide discrepancies in what a consumer thinks their credit score is, compared the the FICO based credit score used in the mortgage industry.
Our advice for dealing with competing credit scoring models is to focus the consumer's attention to the health of the content on their credit profile. There are literally hundreds of credit scoring models on the market, but most of them use the same credit scoring data provided by the three big credit bureaus. Instead of trying to defend the outdated FICO scoring model used in the mortgage industry against their Credit Karma, VantageScore based credit score, simply focus on the content of each report. Credit scores are a snapshot in time, and educating consumers on the benefits of healthy credit will save them (and you) serious headaches next time they apply for a loan.
If you are looking to go deeper down the rabbit hole of credit scoring, here are some additional resources and articles that may help.
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