A little known fact outside the lending sector is that creditors may see a different credit score than the one you pull from a credit reporting agency. That's because lenders may use a different algorithm to determine a credit score. As a result, you might get turned down for a loan -- even when the credit bureaus rate you good risk -- for a low score the lender sees on its end but that is never revealed to you. Sometimes, a bank will gives the score it uses to you for free.
Banks are not in the business of selling credit scores, but some banks have deals with one or more of the major credit bureaus to provide free credit scores as a benefit of doing business with the bank. Most banks that offer free credit scores do not want that fact published. As of 2010, only Pennsylvania State Employees Credit Union allows the Fair Isaac Corp. (FICO) to identify it as a bank that gives away free scores via FICO's Score view program.
Lenders run a hard inquiry into a consumer's credit history during the application process. Assuming the lender uses a credit scoring formula, the officer can show you the rating from the scoring formula on his computer screen. This is not always possible, such as when you do not go to a brick-and-mortar branch, or the lender might refuse to show it to you.
Legislative Changes in 2011
The 2011 Dodd-Frank Wall Street Reform and Consumer Protection Act requires banks to provide borrowers a free FICO credit score if they reject a consumer for a loan based on his credit report, according to Bankrate. As of March 2011 the regulations are pending and nobody knows exactly which types of lenders or other parties might have to provide credit scores.
Obtaining a free credit score from the bank after applying for a loan is a poor choice, because you want to make sure you have excellent credit before starting the application process. Also, even if the bank offers a free credit score, this may not help you ascertain your creditworthiness, because it might be an "educational" score. American Express, for example, offers a free Experian PLUS score to its customers, but AMEX does not use PLUS scores in its lending decisions, according to a report on Fox Business.
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