Did you know that credit scores are calculated differently for a mortgage loan? Every online service and industry uses different scoring models to come up with a credit score that will be used to determine an interest rate or the ability to get a loan. Whether it’s a home, a car or a department store, they all use different methods to determine credit worthiness.
The most widely recognized score is the Fair Isaac Corporation “FICO” score, which is the industry leader and has been providing credit scores since 1956. The other scoring platforms are Credit Karma, Experian, Equifax and TransUnion. Credit scores generated by each of the three main bureaus (Experian, TransUnion, Equifax) are often different because they each have their own software that creates the actual credit score.
Mortgage company credit scores are the most conservative because of the amount of credit that is usually required to purchase a home. Because of this, a buyer should always get pre-approved with a mortgage lender. Not only will a valid credit score be established but the buyer will be informed as to exactly how much they can spend on a home purchase.
It is a great idea to get a copy of your credit report every year. Federal law allows consumers to request a free copy of their credit report annually from each of the three major bureaus by going to AnnualCreditReport.com. Although a credit score is not provided on the report, consumers can verify the accuracy of what is being reported and dispute items that are incorrect or clear up any outstanding issues like collections.
Every kind of purchase is connected to a credit score and if the information is inaccurate you could potentially have to pay a higher interest rate or be denied credit all together. And with the high amount of fraud these days, following your credit score is extremely important!
Information is courtesy of Florida Realtor Magazine, July 2023