What Is a Proprietary Credit Score and How Does It Work?

Credit scores influence financial decisions, but not all scores function the same way. While many consumers are familiar with FICO and VantageScore, lenders often rely on proprietary credit scores tailored to their own criteria. These internal models help determine loan approvals, interest rates, and credit limits in ways that standardized scores may not fully capture.

Since these scores are not publicly available, understanding their impact on lending decisions can be challenging.

Internal Data Factors

Proprietary credit scores incorporate a lender’s internal data, extending beyond what traditional credit bureaus provide. While FICO and VantageScore assess payment history, credit utilization, and account age, proprietary models analyze borrower behaviors specific to each institution.

Banks may consider deposit activity, overdraft frequency, and average account balances to gauge financial stability. Credit card issuers track spending patterns, cash advances, and repayment habits to assess risk. Mortgage lenders focus on rent payment history and savings patterns, while auto lenders emphasize past car loan performance and insurance payment consistency.

Some financial institutions even factor in engagement metrics, such as online banking logins or the use of budgeting tools. These indicators of financial responsibility are not part of traditional credit scoring models but can influence a lender’s assessment.

Variation Among Different Companies

Financial institutions develop proprietary scores based on their specific risk models, leading to significant differences in borrower evaluations. A large national bank might use machine learning to analyze transaction data, while a regional credit union may prioritize local economic conditions and long-term customer relationships.

Retail lenders, such as department store credit cards, often emphasize recent purchase behavior and loyalty program activity. A frequent shopper who consistently pays off their balance may receive a higher proprietary score, even if their FICO score is average.

Online lenders specializing in personal loans may incorporate alternative data sources, such as utility bill payments or employment stability, to assess applicants with limited credit history. Fintech companies take an even more data-driven approach, sometimes factoring in social media activity, education background, or mobile phone usage patterns. While these unconventional metrics help evaluate borrowers without traditional credit histories, they also raise concerns about fairness and transparency.

Role in Loan Underwriting

Lenders use proprietary credit scores to refine underwriting, assessing borrower risk with greater precision than standardized models. These scores influence loan approvals, interest rates, repayment terms, and credit limits.

A borrower with a strong proprietary score may qualify for better loan terms, even if their FICO score is average. Conversely, someone with a high FICO score but a weaker proprietary score could face stricter terms or even a denial.

Underwriting models combine proprietary scores with other financial indicators to create a detailed risk profile. A small business lender, for example, might weigh cash flow stability and seasonal revenue trends alongside the applicant’s proprietary score. Mortgage lenders often factor in debt-to-income ratios, loan-to-value assessments, and geographic property risks to determine whether a borrower can sustain long-term payments.

How to Request Score Information

Unlike traditional credit scores, proprietary scores are not always disclosed to consumers, making it difficult to understand their impact on financial decisions. While the Fair Credit Reporting Act (FCRA) requires lenders to provide reasons for adverse credit decisions, it does not mandate disclosure of proprietary scores.

One way to gain insight is by requesting a risk-based pricing notice, which lenders must provide when offering less favorable terms due to credit-related factors. While the proprietary score itself may not be included, the notice outlines key reasons for the decision, offering clues about what the lender prioritizes.

Some financial institutions may voluntarily disclose proprietary scores upon request, especially if they offer consumer-facing credit monitoring tools. Borrowers can also ask lenders directly about the factors influencing their creditworthiness, though responses vary by institution.