Many home buyers do not realize that the tools they use to monitor their credit scores may not provide the complete picture, so your credit score may be lower than you think. The score a mortgage lender considers in evaluating your loan application may be lower than the one you see when you check it yourself. Finding out late in the game that your lender thinks you have a lower credit score than you understood it to be could be an unwelcome surprise. If the difference is big enough to bump you into a lower credit tier, you could end up with a higher interest rate and/or smaller home-buying budget than you had planned.
Free credit-monitoring tools don’t show the whole picture
There can be a disconnect between the credit scores that you can obtain for free and the ones your mortgage lender is using. Banks, credit card companies, and other financial providers typically show you your credit score for free when you use their service. But the scores you receive from those third-party providers are meant to be educational. They will give you a broad understanding of how good your credit is, but they are not always totally accurate. Creditors and lenders, on the other hand, use more specific industry credit scores, customized for the type of credit product for which you are applying.
For example, auto lenders typically use a credit score that better predicts the likelihood that you would default on an auto loan. By contrast, mortgage lenders are required to use a unique version of the FICO score almost exclusively. Mortgage lenders will use a tougher credit scoring model because they need to be extra sure that borrowers can pay back a large debt. So, there is a good chance your lender’s scoring model will turn up a different (usually lower) score than the one you get from a free site.
Take charge of your financial picture
The details of credit scoring are getting more complex every year. Take charge of your financial picture. You can ensure your credit history is free from errors and reflects the highest possible score. Connect with Scorewell for a free consultation. Contact us here.