What Consumers Don’t Know about Free Credit Score Companies

November 2, 2021
Shawn Lane
Consumer Credit Expert

If you’re trying to actively monitor your credit, paying for a copy of your credit score can be a frustrating expense. In this situation, companies offering a free copy of your credit score probably seem like a godsend.

But while these services can show you a free credit score, it might not be the score you’re actually looking for. Here’s what you should know about free credit score companies, and how confusion about what they offer can have real consequences for consumers.

What Consumers Don’t Know About Free Credit Scores
Most consumers don’t know that there is more than one type of credit score. In fact, there are dozens.
There are three different credit bureaus that produce credit reports: TransUnion, Equifax and Experian. There are also two main companies that use information from those credit bureaus to calculate their credit scores: FICO and VantageScore.
FICO scores are used by more than 90% of lenders and credit card companies when deciding whether to approve an applicant, what kind of interest rate they deserve and how much money to lend them.
The free scores you see from sites like Credit Karma, your bank or your credit card provider are very rarely produced by FICO. These scores are usually produced by VantageScore.
VantageScore uses a similar scoring model to FICO, but these scores are less commonly used by lenders.  A VantageScore credit score may be lower or higher than a FICO score, and the difference can be as high as 40 points or more. This discrepancy can significantly impact the kind of interest rate you receive. 
Also, both FICO and VantageScore tweak their scoring algorithm every year or so. Unfortunately, the models used by the free credit score companies may be outdated and not reflect the actual algorithm currently used by lenders.
Another lesser known credit score fact is that there are different algorithms for different types of loans. For example, mortgage lenders use a different scoring model than auto lenders do.

How That Confusion Hurts Borrowers
This is what happens when borrowers mistake their free credit score for the score that a lender sees. Let’s say you check your free credit score and see that it’s above a certain threshold, so you decide to apply for a loan.
But when you apply with a lender, they say that your score is lower than the free score you received, leaving you with a higher interest rate than you anticipated. Because you want to pay less in interest, you decide to wait until your score is higher to re-apply. But now you have a hard inquiry on your credit report, which drags your score down even lower.
Where Can You See Your Real Score?
Unfortunately, it’s almost impossible to see the exact score that a lender will see without paying for it. Banks like Discover, American Express and Citibank will show your FICO score, but remember that it may not be the exact iteration a lender will use.
To see multiple versions of your FICO score, you can sign up for a monthly subscription to MyFICO.com. The cost ranges from $19.95 to $39.95 a month.

The Bottom Line
If you want to see what’s happening with your credit score in a more general sense, then a free service is fine. Just be aware that those scores may not be the same as what a lender or credit card company will see.
Before you apply for a major loan like a mortgage, consider paying for a FICO score just for a month. This will let you see if your score is high enough to get the best interest rate, or if you should hold off until your score is a little higher.

If you have any questions or need help improving your credit, schedule a free credit analysis with a Financial Renovation Solutions credit consultant today.