There are several kind of credit scores, the one used by most of the lenders is the FICO scores. But each credit report bureau has their own name. It is called Beacon Score for Equifax, Experian/FICO Score for Experian and Empirica Score for TransUnion.

Scores range from 300 to 850. The higher scores represent lower risk. It is normal that there are small discrepancies (10 to 20 points) among the three credit reporting bureaus. 

Every score is accompanied by a maximum of four reason codes. Reason codes identify the most significant reason that a consumer did not score higher. They are not red flags. Consumers with scores in the 800 range get reason codes just as consumers with scores in the 500 range. The reason codes may be used in describing to the consumer the reason for adverse action. Scores are not part of the credit file and are not covered by the Fair Credit Reporting Act. Scores, if disclosed to the consumer, must be related to the credit file - using the reason codes - since the score has no meaning in itself; the meaning or risk level is assigned by the lender and the investor.

The followings are some reason code descriptions shown on the credit reports.

• Level of delinquency on account
• Too few bank revolving accounts
• Proportion of loan balances to loan amounts is too high
• Too many bank or national revolving accounts
• Too many accounts with balances
• Too many inquiries last 12 month

The following table shows the FICO score distribution.

The actual scoring process is proprietary, and the algorithms are copyrighted. We can share the predictive variables, the portion of the credit file considered and the weight as provided by Fair Isaac. They are:

Payment History (35%)
Amounts Owned (30%)
Length of Credit History (15%)
Types of  Credit in Use (10%)
New Credit (10%)

FICO has changed the way it factors credit checks, inquiries. These changes should minimize the "negative" effects that aggressive rate shopping or the normal mortgage process can have on a mortgage applicant. In the new Beacon version, the deduping process has been expanded beyond seven days. One variable counts the number of days within 365 days of scoring. If there has not been an inquiry, the deduping mechanism is not activated. If there is a consumer originated inquiry within the past 365 days from mortgage or auto related industries, these inquiries are ignored for the first 30 calendar days from scoring; then, multiple inquiries within the next 14 days are counted as one. Each inquiry will still appear on the credit report.

When applicants have erroneous information reported, document the inaccuracies. The easiest way to do that is to have your credit-reporting agency upgrade the merged in-file to an edited mid-range report or to a Residential Mortgage Credit Report. With the upgraded report, you can ignore the score! The file will have to be handled in a traditional manner for underwriting and investment purposes. The developed report will provide the paper trail that investors want.