Secret Credit Scores
Not the real Beatles, like you may not have the credit score lenders use…
Secret Credit Scores Could Be Making Your Task More Challenging
Here’s the picture: You walk into a car dealer with your credit score and you say, “Hey, I’ve got a 750 credit score”. Your goal: you want the best rate. Right away, it can start to get a little confusing. First, the car dealer may ask you if you have a FICO credit score, if the answer is no, then you may be thinking you need to get your FICO score so you can have an apples to apples discussion. Personally, I’ve seen a 50+ point difference in my TU FICO and TU non-FICO score. Then, you need to ask which FICO score you need. Remember, there are three FICO credit scores used from the three bureaus of Experian, Trans Union and Equifax. Car dealers typically use just one of the scores [yes, mortgage lenders use all three because the transaction is bigger and the defaults hurt more].
But, does the confusion end there? Sadly no. The auto dealer is likely using something called the “FICO Auto Industry Option”. This is a scoring model that has been tweaked for risk specifically for auto loans. This might make sense to you, depending on where you sit in this great debate. Auto lenders want to assess risk for auto loans, so they want to tweak a general credit score model to be more predictive in auto loan situations. Credit card companies do the same thing in their credit score models. They have a bankcard score which gives more weight to how a user handle credit cards vs. say auto loans.
So, why all the secrecy? I’m not sure it’s meant to be so secretive, but rather this arose out of a need to predict risk better. Opponents of the use of credit scores for employment will argue that employment isn’t even a factor in credit scoring, so why use these scores at all — it’s not like they can be weighted for employment? Proponents say they still predict risk better than nothing. Still, the scores are secretive and secrecy is usually not so good for the user.
Having scenarios where users are confused usually leads to consumer harm. Sorry, but I have to believe that someone who is barely knowledgeable about credit scores might fall prey to savvy auto lender who knows how to twist the situation in their favor.
What should you do about running into a secret score?
- Walk in armed with as much ammo as you can get. That means that while their be a secret score in play, you are still better off knowing something about your credit and the rates that should equate to this.
- Get your FICO scores. Sorry, but a Vantage Score is just one more step removed. Credit Karma? Good for insights, but when you are ready to do battle, you want to best closest cousin score available to you and that’s going to be your FICO score.
- Know that the secret score is probably not that far off. Don’t get your confidence don’t that their might be an important swing in the numbers.
- If the difference between your FICO score and the industry-specific score does imply a different credit interest rate, don’t panic. Often times, car dealers use different scoring models, so it’s worth it to check another auto lender to see if they have a different rate. Reminder: you don’t have to get your auto loan via the dealer!!! You have other options like your bank or credit union. One of these scores might be more aligned to the FICO score you have.