More and more credit card companies offer a free FICO credit score to customers.
Since you usually have to pay a fee to get your score from the three major credit bureaus, getting a free score seems like a great deal. But the free score they give you can be entirely different than the FICO score from the credit bureaus. Below, find out how these scores are different.
Getting my free FICO update
I’ve had a Discover card for about 10 years; I get great rewards and I find their customer service to be excellent. When they added the free credit score perk to my account, I was thrilled.
I’m considering buying a home, so last month I checked my Discover statement to get my latest score. The site told me my credit had reached an all-time high of 817. That would put me in the “excellent borrower” category, and I’d be able to get the most competitive interest rates on the market.
But when I applied for mortgage pre-approval, the lender disagreed. They sent me a report from Experian, one of the big three credit bureaus, that showed my score was just 765 — a 52 point discrepancy.
That’s not a humblebrag; 765 is a totally respectable credit score. But it would put me in the “very dependable borrower” range rather than “exceptional.” And that 50 point difference can translate to a higher interest rate, costing me thousands more over the length of a 30-year mortgage term.
So why is there such a difference between scores?
Explaining credit scores
There are several factors that can cause your free credit score from a credit card company to differ from the score reported by the credit bureaus. Here are the three main reasons for the discrepancy:
1. Credit scores from different credit bureaus
There are three main credit bureaus: TransUnion, Equifax, and Experian. Some credit card companies offer a free score from one of the bureaus, but that score may be different than the credit score from another company.
In my case, Discover uses TransUnion to calculate the credit score, and apparently, TransUnion thinks I’m exceptional. But my mortgage lender went through Experian, which calculates its credit score differently and found me to be only very dependable.
Some credit cards don’t use any of the three bureaus. Instead, they may use credit scores that are called “equivalency scores” or “educational scores.” While they can give you an estimate of your credit score, they are far from accurate.
2. When the company pulled your information
Another factor that can influence your score is when the company looks up your information. If the credit bureau pulls your report when you have a balance, you will have a lower score. But if they calculate it right after you make a big payment, it will be higher.
That’s certainly true in my case. My Discover credit score is updated each month the day after my payment is due, so my balance is always at zero when they run it. The score provided by Experian was pulled in the middle of the month, when my balance tends to be at its highest. That likely affected my credit utilization ratio and lowered my score.
3. Different inquiries use different scores
Even if you’re familiar with FICO scores, did you know that there are different scores depending on the kind of loan you’re pursuing?
There are actually 49 types of FICO scores, each using a different calculation and formula depending on the industry. For example, my Discover card uses FICO score 8, a common score used by credit card companies to evaluate customers’ credit limits. It looks mainly at credit card usage and isolated late payments.
But my mortgage lender used FICO score 2, which also takes into account your other types of debt, such as student loans, personal loans, or auto loans — and that can result in a lower score.
Do free FICO scores have value?
While your score from the credit card company may not be 100 percent accurate for all borrowing scenarios, it’s still very useful in giving you a FICO score range.
Having a ballpark estimate of how good your score is can be helpful. If it’s lower than you would like, you can take steps to improve your credit, without having to spend money on a report.
If your score looks good, you know you should be in excellent shape when applying for any kind of loan.
Just keep in mind that there may be some discrepancies, and continue to monitor your overall credit report regularly to make sure everything is accurate.
If your credit isn’t where you want it to be, don’t give up hope. See how one man raised his credit score by 500 points, achieving near-perfect credit.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|