Have you checked your credit score lately?
Some of us get a glimpse into our credit score from time to time, whether we are applying for a new loan, our credit card company offers it when we log in, or we’ve even checked our scores for free at annualcreditreport.com.
So, armed with the confidence that your score is over 700, for example, you call your favorite real estate agent to go house shopping. After all, it’s a foregone conclusion that you’ll be approved for a mortgage since your score is so solid.
You spend several weekends driving around looking at listings and stopping in on open houses, you write a few offers, and finally get one accepted – it’s your dream home!
However, when you call your mortgage lender to make it official and they run your credit, you get a nasty surprise – your credit score is only 658 and you don’t qualify for the home.
How is that possible?!
Little did you know, but you actually have a “mortgage credit score,” among your dozens or even scores of different versions of scores.
In fact, a specific algorithm factors your credit score for the purposes of applying for a home loan. And the result is that when a broker, bank, or lender runs your credit when you’re ready to apply for a mortgage, your score often comes out LOWER than the scores you typically see!
That leads to a lot of confusion among home shoppers or those looking to refinance, as well as delays, losing the home of your dreams, and, of course, a higher mortgage rate and more expensive payments.
So, please be aware that the score you see for free, from a vendor, or on a credit monitoring app is NOT the score that your lenders will see when they consider offering you a home loan.
For the most part, those free scores issued by a third-party provider are just for educational purposes – as a guide or reference to see if your score has gone up or down. But lenders use different scoring models for different purposes, and there are so many that you would be shocked.
So, you definitely want to access your true credit score for purposes of taking out a home loan, or your “mortgage credit score.” That consists of your FICO score from the three main credit bureaus, Equifax, TransUnion, and Experian, and they use your MID score from the three.
Why is your Mortgage Credit Score most likely to be sustainingly lower than other versions of your score?
Banks and mortgage lenders prefer a far more conservative picture of your credit, which is a smart bet since they’re lending hundreds of thousands of dollars to the home buyer or owner.
If they are underestimate any blips on the borrower’s credit report, the consequences will cost them far more than just a credit card or even auto loan that goes into default.
So, mortgage lenders are exercise an extra level of scrutiny and make safer decisions when underwriting loans, leading them to lean on a different credit scoring model.
Of course, this knowledge can be a huge advantage – or detriment – the average home buyer or those looking to refinance.
Your mortgage credit score can impact:
- Your mortgage rate
- The monthly payment
- Total interest paid
- Loan programs available and options
- Down payment requirements
- The need for mortgage insurance
- Your allowable Debt-to-Income ratio and therefore your home price range
- Possibly your costs and fees for the loan
Therefore, it’s critical that you check the CORRECT credit score when you’re thinking about buying or refinancing.
Ideally, you reach out to Blue Water Credit SIX to NINE MONTHS before you’re ready to apply for a loan, since we need time to work with you and improve your credit score if necessary.
Your mortgage broker or lender can also help pull the credit score when you get pre-qualified (which is so important), and they’ll recommend Blue Water Credit if credit rehabilitation can help save you money.
But if you’re interested in checking your mortgage credit score yourself, make sure to check your FICO – not Vantage Score.
You can do so at https://www.myfico.com,
Or contact Blue Water Credit for more advice and guidance.