3 reasons you and your lender may disagree on your credit score

Question for the CreditCards.com expert

Dear Credit Score Report,
My credit scores are 762, 742 and 713. My bank is telling me the score that they are using to refinance me with is 650. Something sounds fishy. Is this a way for them to get more money? -- Rick

Answer for the CreditCards.com expert

Hey Rick,
Something fishy may be going on, but it's also possible there's simply some confusion over what credit score is being used. You'll need to investigate to find out what's really happening.  

First, let's consider the nonfishy explanations. There are two main possibilities:

  • Type. The credit scores you saw are based on a different model than the score your bank is using.
  • Timing. It's been a while since you checked those scores, and they may have changed over that time period.

As for the score type, there isn't one model used by all mortgage lenders, so your bank has the choice of what information to consider. "Different lenders may use different scores or processes for determining credit worthiness," says John Mechem, spokesman for the Mortgage Bankers Association (MBA), the national association representing the real estate finance industry. Meanwhile, you could have purchased different types of credit scores from any number of places, including from a credit bureau or somewhere online. Banks, however, most often consider the FICO credit score. FICO, the company that pioneered credit scoring formulas, says mortgage lenders use its scores on at least 75 percent of all U.S. residential mortgage originations (the processing of loan applications).

But mortgage lenders don't have to use FICO scores -- or any other credit scores, for that matter. "They may bypass the score altogether and look at the full credit history, including the credit report," the Mortgage Bankers Association's Mechem says. So your bank has a choice of what information to use during the refinancing process. To find out what scoring model is being considered in your case, you'll need to ask the lender.

Because your credit scores can change, timing is also an important factor. If the three numbers you saw are FICO scores, then it certainly has been a while since you checked them, since it's no longer possible to view the FICO scores from all three credit bureaus. With a few exceptions, consumers lost access to their Experian-based FICO scores back in February 2009.

Changes in your credit history will impact those scores. Think about your borrowing behavior since you last checked your credit: Have you missed any loan repayments? Borrowed more money? Canceled any credit cards? Such actions could influence your credit scores. Additionally, your credit scores can drop through no fault of your own. Errors that have cropped up on your reports could be impacting your credit, so look over your credit reports from all three bureaus (Experian, Equifax and TransUnion) for any mistakes and dispute them.

However, the possibilities I've outlined may not explain why your lender is using that score. Experts agree that what you describe is unusual. "Most mortgage lenders will take the middle score as 'the' score for an applicant. In Rick's case, that would be the 742 score," says Gregg Weldon, chief analytical officer with AnalyticsIQ Inc. in Atlanta. (Weldon knows scoring models; he built generic and custom models for Equifax in the mid- to late-'90s.)

"I'm not sure why they would go with 650 (750 maybe, but NOT 650). There's something definitely wrong there," Weldon says in an e-mail.

I hope that by asking the right questions and checking your credit, you can figure out what's going on. But if something still smells funny even after you take those steps, you may need to cut bait and find a new bank. It's what the mortgage industry recommends. "We encourage all borrowers to shop their loan to different lenders," MBA's Mechem says.

Good luck!


See related: Consumers lose access to major credit score, Free credit reports: How to get the actual free one, How to dispute credit report errors, Decade-old credit mistakes shouldn't appear on your reportRefinancing won't do lasting credit score damage

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Updated: 03-21-2019