You won’t believe how many times we’ve had a client inform us the credit score we pulled is incorrect. We get this all the time and, the funny thing is, it’s actually the other way around.
This phenomenon began around the time websites like Credit Karma started popping up. Before coming in for pre-approval, our clients would pull their scores from a website and take it at face value. Don’t get us wrong, credit scores on sites like that are correct, they just aren’t the type of credit score we are able to use to determine your eligibility for a loan.
There are hundreds of types of credit scores, all using different scoring models. However, there are only three different scoring models that mortgage lenders can use to assess your creditworthiness: Equifax Beacon® 5.0; Experian®/Fair Isaac Risk Model V2SM; TransUnion FICO® Risk Score, Classic 04.
So, how are you supposed to find out your credit score? We have to tell you, coming in is the easiest option. By simply scheduling an appointment with us and providing a little bit of information, we can present your credit scores and discuss how they affect your mortgage.
In these meetings, we always end up discussing what factors into credit scores, but we’ll let you in on that secret now. Listed below is everything that factors into your credit score, in order of greatest to least impact.
- Payment history – This is used to determine how likely you are to repay a loan. Fun fact: did you know that a late payment can impact your score for seven years?
- Age and type of credit – A mix between credit cards and loans over time is best for your score.
- Credit utilization – We recommend that you never let your balance exceed 30% of your credit limit.
- Total balances – This includes all of your current and delinquent debt.
- Recent behavior – Your recent behavior includes all of your recently opened accounts and the amount of hard inquires placed on your file.
- Available credit at your disposal
But we understand – not everyone wants to come in for a chat. Luckily, you are able to pull a free annual credit report from each of the major credit-reporting bureaus, Equifax, TransUnion, and Experian. While these reports do not contain your actual credit score, they give you a detailed look at everything affecting your credit score.
These reports can be pretty lengthy due to the amount of information included, but it’s a great idea to pull these reports yearly and comb through for any mistakes that could harm your credit.
As you can see, there’s a lot to know about credit scores and how they pertain to your mortgage. Contact us today to set up an appointment!