Here’s the scenario: You’re working to get your borrower the commercial mortgage they need. The lender asks for some basic information to review the mortgage request, including a credit report. Your borrower pulls one of the free reports available online.  Eventually, the lender pulls a tri-merge credit report and it turns out there are some differences. Why?

Everyone uses a different formula.

According to an article published in Forbes, the card issuers, free sites and credit rating agencies all use different formulas to evaluate a person’s credit. Some use FICO-created scores, while others use VantageScore, which was developed by Experian, Equifax and TransUnion. Some sites compute credit scores with a single bureau, while others use all three.

Credit score ranges vary.

Because there are several formulas in use to compute credit scores, the scores vary from bureau to bureau and site to site. For example, FICO and TransUnion’s New Account score ranges from 300 to 850, while Vantage ranges from 501 to 990. Equifax scores are between 280 and 850 and Experian’s are from 330 to 880.

The free credit scores are generally more of a “ballpark” estimate.

Pulling a credit report from a free site is a good way to ascertain the overall health of your credit, but these aren’t the scores used by financial institutions or lenders.

When you’re working with a borrower looking for a commercial mortgage, their credit is going to be a key component in determining whether a lender can finance their request. Because it’s such a crucial factor, it’s a good idea to speak with the lender beforehand to see which score they actually use. Each bureau is required to give individuals a free report annually if they ask. Tell your borrower to order theirs at annualcreditreport.com or by calling 877-322-8228. If they’ve already ordered their annual credit report, and you want something more recent, the free reports available online will give you and your lender a good idea of the borrower’s credit health.

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