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Think you have three credit scores? You may have 50 or more

Signs advertising bad credit auto loans, in this 2008 file photo.
Signs advertising bad credit auto loans, in this 2008 file photo.Paul Sakuma / AP, file

You probably know you have a credit score, and that score dictates much of your financial future. You might know you have three credit scores, thanks to aggressive advertising from companies that sell access to them.

However, those hardly scratch the surface of the collection of credit scores lenders might use to judge you.  There are, most likely, dozens of scores that might control your ability to get a mortgage, buy a car or obtain insurance.  

Banks often use their own scores, tweaked versions of the FICO score that began the credit score craze. Auto lenders also have their own scores. So do car insurers. And old scores, based on old formulas, are still in use by many lenders.  U.S. consumers may have 50 different credit scores -- or more -- that could impact their ability to borrow money, and that number is rising, experts say.

"The idea of there being a one true credit score, well that's just not accurate," said Michael Schreiber, editor in chief at Credit.Com, a consumer advice website.

John Ulzheimer, a credit score expert who formerly worked for FICO score inventor Fair Isaac Corp., produced a detailed infographic for CreditSesame.com in September which detailed 49 different scores based on the FICO. He has found another five or six since them. And that number doesn't include competitors like Vantage Score, invented by the credit bureaus in an attempt to cut out Fair Isaac, or other proprietary kinds of credit scores. 

"Getting your actual credit score is a like game of roulette at this point," said Ulzheimer, now president of consumer education at SmartCredit.com. "Getting the wrong number can be overwhelming to a consumer. The lender is using one score but you don't know which score."

There are also exotic credit-based scores, such as a "revenue score," which predicts how much interest revenue a credit card holder will generate; a bankruptcy score indicating the likelihood someone will file for legal relief of debts; and a collection score that helps debt collectors prioritize their efforts.

Credit scores were once held completely in secret by the credit industry, but are more available to the public today. Credit monitoring services include them with monthly subscriptions. Fair Isaac, the inventor of the credit score, sells FICO scores at MyFico.com. Wells Fargo gives them away to consumers who walk in and ask about new accounts. Credit.com gives away a free score to site visitors. But with more scores being invented all the time, it's hard to say what consumers are looking at when they receive a credit score.

"It does irk people when they find out there's a very different number they get from one scoring model to another," said Gerri Detweiler, scoring expert at Credit.com. "People wonder, 'What good is it to check my score if the score banks see is different?'"

If any credit score provider implies consumers are getting a comprehensive view of their creditworthiness by ordering three credit scores -- based on their three credit reports at Equifax, Trans Union, and Experian -- that's misleading, Detweiler said. It's also misleading for any firm to suggest their score is the one used by most lenders.

Ulzheimer think so, too.

"If you go to MyFico and you get a score, that is the same brand of score that lenders are using predominantly," said Ulzheimer. "Going past that is an embellishment. … MyFico does sell you a FICO score, but it may not be the same FICO score that lenders use."

In fact, many banks have their own scores, which sprinkle their own criteria into the complex algorithm.  Car loan issuers, for example, often choose to weigh previous car loan payment history higher than other lenders, Detweiler said.

The proliferation of scores is partly the result of continuous updates to scoring formulas that are expensive for financial institutions to adopt, Ulzheimer said. 

"Scores are really nothing more than generations of software," he said. "Think of how many generations of Microsoft software are out there, for example.  Every year, there's something new that's a little better but kind of does the same thing.  Scoring systems are like that."

For example: Last week, the group behind the Vantage scoring system announced VantageScore 3.0. It has some consumer-friendly features, such as ignoring collections accounts that have been paid off (such accounts generally lower a consumer's FICO score), and providing exceptions for consumers who don't pay bills because of natural disasters like Hurricane Sandy. But firms may continue to use VantageScore 2.0 for a long time.

"A large bank that didn't want to update its systems could force providers to keep old scoring systems going for years," Ulzheimer said.

Given the proliferation of scores, should consumers even bother trying to see one of their credit scores?  Absolutely, says Detweiler. She says any score will offer a helpful reference point.

"Don't focus so much on the number as much as what direction you are moving," she says. "The number will give you some information about what areas of your financial life you need to work on.  But if there is a drop, you will know something significant has happened."

The number itself doesn't matter as much as how a consumer compares to the general population, she said. Armed with this information, consumers should be able to ensure they are getting a fair interest rate when borrowing money for a home or a car or applying for a credit card.  Consumers who rank near the top of a scoring scale should get a bank's best rate.

Because she thinks consumers should track their score over time, Detweiler says it's important to stick with the same score than trying to compare a free score doled out by a bank with another score purchased from a website.

Ulzheimer said it's fruitless and frustrating for consumers to obsessively follow their credit scores as they pop up and down, given that lenders see different scores anyway. He recommends "managing" to your credit report instead of your credit score, since the report is at the heart of all score formulas.

"What's constant across all scores is that doing the right thing will lead to a better score across the board,” he said. “If you pay your bills on time, your scores will go up. So worry about that. Managing to three credit reports is easier than trying to manage all those credit scores. ...Consumers have to let go of that, because the number of scores will continue to get larger, not smaller."

That's not to suggest variations among credit scores aren't important. In September, the Consumer Financial Protection Bureau published a study of credit scores revealing that variations among different scoring models could impact as consumer's borrowing costs about 20 percent of the time.

The study recommended that firms that sell credit scores "should make consumers aware that the scores consumers purchase could vary, sometimes substantially, from the scores used by creditors."

The best way to avoid paying too much for credit because of a credit score variation is to shop around. Never take the auto dealer's word for it that they've gotten you the best deal on your car loan.  The variations matter less with mortgages, where banks usually get three credit scores and throw out the lowest and higher score.

Detweiler said for personal sanity, consumers should avoid treating credit scores the way they treated SAT scores in high school, or grade point averages in college.

"Don't get too hung up on a number," she said.  "You know the serenity prayer? There are some things you have control over, and some you don't. Take care of the things you can control, like paying your bills, and the score will take care of itself." 

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