NOT ALL CREDIT SCORES ARE THE SAME
You have probably had it happen to you. An online service, that you or may not subscribe to. sends you your credit score and when you apply for a car loan or a mortgage and you surprisingly find out that your score is dramatically lower. How can this be? The answer is both simple and complicated. Every online service and industry uses different scoring models to come up with a “credit score”that will be used to provide you with an interest rate or the ability to get a loan.
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 scores you might have heard of are Vantage Score (Credit Karma), Plus Score (Experian), Equifax Credit Score (Equifax), and Vantage Score (TransUnion). Credit scores generated by each of the three main bureaus (Experian, TransUnion, Equifax) are often different because they each have their own proprietary software that creates the credit score. And. to make it even more complicated, each bureau generates a different credit score for a particular industry. For example, if you had your credit report pulled by an auto dealer, a cable company, a department store, and a mortgage company on the same day. you would be amazed by the wide discrepancy among the different scores. Consumers should be aware that mortgage company credit scores are the most conservative because of the amount of credit that is usually required to purchase a home.
As a consumer, federal law allows you to request a free copy of your credit report once a year from each of the three bureaus by going to www.AnnualCreditReport. com. Although a credit score is not provided on the report, it will help you verify the accuracy of what is being reported and allow you the opportunity to dispute items that are incorrect or clear up any outstanding issues like collections. The Consumer Financial Protection Bureau (CFPB) started regulating the credit reporting industry in 2012 and they have handled approximately 185.700 credit reporting complaints as of February 1, 2017. Learn more about the work of the CFPB in your area and your consumer rights at www.consumerfinance.gov. Look toward the bottom of the page for CFPB Oversight Uncovers and Corrects Credit Reporting Problems under “Press Releases”.
Although there are many factors that go Into purchasing a home besides credit score, every consumer should be aware that having a good credit score does not necessarily mean that you do not have inaccurate items on your credit report that could potentially cause you to pay a higher interest rate or even worse, be denied for a home loan. Please call me if you are in the process of buying a home and would like to discuss the impact of your credit, and the negative or positive effect it could have on your ability to get a home loan.