The free credit scores you pull online (aka consumer credit scores) and the credit scores you receive whenever a lender accesses your credit as part of a loan application are often worlds apart. Many of the consumer credit scores which you can access online are some version of the Vantage Score credit scoring model. By contrast most credit scores used by lenders will fall under the FICO brand.
Some online consumer scores are free, some may require a fee, and others may be available as part of a free or $1 trial offer to try out a credit monitoring service. It is also worth noting that the free credit scores you receive online are generally higher than the credit scores you might see if they were pulled by a lender.
Whether you pay for a consumer credit score online or whether you access free credit scores you may be wondering whether or not these online credit scores have any value. They are, after all, quite different from the FICO credit scores which are typically used by lenders. Does that difference mean they are worthless?
What the CFPB Thinks About Free Credit Scores
Per the CFPB the credit reporting agencies (CRAs) previously misstated how the credit scores they sold were actually used, leading consumers to believe that the credit scores purchased online were the same ones which were used by lenders whenever they applied for a loan or credit card. As a result of the alleged deception the CRAs were fined heavily and required to pay tens of thousands of dollars in restitution to harmed consumers.
Lenders do, of course, rely upon credit scores to make decisions about whether or not to do business with a consumer and how much to charge the consumers with whom they do want a relationship. However, as mentioned above, the free credit scores found online and those sold by the CRAs typically are not the same credit scores being used by lenders. According to the CFPB the CRAs did not explain this fact to the consumers purchasing their credit scores online, thus deceiving those consumers about the value of the credit scores being purchased or obtained as part of a free or low cost trial offer.
Do Consumer Credit Scores Have Value?
In truth all credit scores do have value. Scores can be useful tools whether they are pulled by a lender, purchased online, or given freely to consumers (typically in exchange for the opportunity to market financial products to those consumers). Even if a credit score is not being used by a lender it can still be beneficial to a consumer.
Free and fee-based consumer credit scores have the ability to help you monitor the condition of your credit. If the VantageScore credit score you pulled online is low, then your FICO credit scores will probably be low as well. However, if you take steps to begin improving your credit and your online consumer credit score begins to increase as a result then your FICO scores will likely be following the same trajectory. Likewise if new credit problems cause your online consumer scores to fall then your FICO scores will probably decrease as well.
It is also important to remember that you do not have one single credit score, but rather there are hundreds of credit scores currently available commercially. Different lenders and different industries will all likely use a different credit scoring model to evaluate and score your credit reports. Therefore, even if you applied for a credit card and an auto loan on the very same day those 2 credit scores pulled by different lenders would most likely not be the same.
Instead of always focusing on the numbers it is really best to focus on developing better credit reports through smart credit management habits (on-time payments, low credit card balances, only applying for new credit when needed, etc.). You may not have any control over which credit score a lender uses, but you do have at lot of control over the condition of your credit reports. Healthy credit reports are going to translate into healthy credit scores no matter where those scores are pulled or by whom.