No Single Credit Score is the Answer

No Single Credit Score is the Answer

According to an article from, one of the most recognized credit scoring companies, Experian, was penalized $3 million last week by The Consumer Financial Protection Bureau (CFPB) for telling consumers that the credit scores they provide are the same scores that lenders use to make credit decisions.  This comes on the heels of similar fines and accusations made against Equifax and TransUnion earlier this year.  The CFPB ordered the credit bureaus to truthfully represent how credit scores are used, and forced them to change the language in their marketing.

A credit score is the numerical summary that predicts a consumer’s payment behavior.  As a consumer, you need to know that no single credit score or credit scoring model is used by every lender.  When you are looking to obtain a mortgage, understand that 9 out of 10 lenders use your FICO scores from the three bureaus in what’s called a tri-merge credit report.  And, of those three, we use the median score as part of our decision to extend credit.  “Tri-merge” is just another way to say 3-in-1.  It’s just one long credit report that includes information provided by all three credit bureaus: Equifax, TransUnion, and Experian, each of which has their own separate credit reports and FICO scores.  The tri-merge is the all-in-one summary that lenders use to get an accurate assessment of your history as a credit user.  Your tri-merge will determine what terms your lender can offer you, including your interest rate.  General rule of thumb: the lower your credit, the higher your interest rate.

The reason lenders use three scores is because we want to make sure nothing slips through the cracks.  It basically allows us to triple check your credit before we give you hundreds of thousands of dollars.  Each credit bureau uses different scoring methodology and software.  They then supply a generic risk score based on their own software.  And, many times, the three credit scores are quite different from one another.  Additionally, the major difference in that tri-merge that your lender pulls in the loan application process and the credit report you see from a website, is that those credit bureaus sell you, the consumer, their own proprietary score, NOT your FICO score.

So, when you think you’re ready to buy a home, understand that the “free credit report” or one credit score from one bureau can be used as a guideline, but understand that a lender’s hard credit pull to assess your credit history is going to be the most accurate.


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