Elizabeth Weintraub • Sacramento Real Estate Agent

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Myth-Busting Mortgage Credit Scoring

The originator of this original piece of content, Gene Mundt, from Chicagoland, has created tons of useful information throughout the years, primarily for homebuyers who have questions about obtaining a mortgage. Because an increasingly large number of buyers are not privy to the behind-the-scenes information. They really do not know what goes into processing a loan or why they might not be accepted despite a preapproval letter. Then you've got the guys who think buying the right to obtain a FICO score is the way to go when it's not. Read on.

 

 

Myth-Busting Mortgage Credit Scoring

 

Over the years, Mortgage Credit Scoring has evolved.  It continues to do so at a fairly constant and rapid rate ...  

 

As a result, a large supply and wide variety of updated articles and reports regarding the topic of Credit Scores (Fair Isaac Corporation (FICO) scores) can be found easily pretty much all the time.  The following link provides an example of one of the many articles that I found while doing a quick search today.  It focuses on a new change that may be coming to some consumers' Credit Scores:  

 

"Credit scores may jump this month thanks to new scoring rules enacted after CFPB study"

 

 

 

While there are many reliable helpful sources of information to be found, there are also many unreliable misleading "myths" to be found too.  Myths that can prove harmful to consumers or potential borrowers, should they be believed or put into practice.  

 

Those myths are what I hope to confront and "bust". 

 

 

To do that, I provide factual references for those looking to improve their Credit Scores or borrow money, either to:

  • Facilitate a real estate transaction (buying)
  • Sell in order to buy another home (step-up)
  • Buy a second or investment home
  • Refinance 

 

It's very important that home buyers/borrowers know and understand: 

 

   1.  Consumers are increasingly aware of the importance of credit scores.  As stated above, that is due to the amount of information and tools easily available to them via the internet, their Lender, and elsewhere.  This info, when correct and utilized properly, can prove to be of great benefit. 

 

          How is it beneficial? 

 

        If a consumer has credit issues or poor Credit Scores:  Some landlords may not rent an apartment/home to you.  Or if they do rent, the security deposit required may be larger ... or made non-refundable.  It's even possible that a landlord because they feel increased financial risk, may charge you more monthly for your rental.            

 

       You may also have difficulty obtaining insurance.  Or if secured, the coverage may cost you more because of your lower Credit Scores.  Other services you need (such as utilities, cell service, etc.) may be more costly or even unattainable if you have poor credit.   

 

       It's a fact:  Poor credit can cost you in a myriad of ways.  Awareness of your Credit Scores (resulting in the improvement of your credit and Credit Scores) can improve your life and save you money. 

 

   2.  Home buyers/borrowers should remember:  While some credit card companies may provide a free Credit Score to their credit cardholders, those scores differ from those used by Mortgage Lenders for their Pre-Approvals or formal Mortgage Approval purposes.  (Note: Credit Scores provided by Credit Card companies are typically higher than those used by Lenders.)

 

         As a consumer, it's best to not give too much weight to the scores received monthly via credit card companies.  For specifics on the Credit Scores that will be used for your mortgage financing, it's best to talk to a Mortgage Lender.

 

        And here's why ...

 

        Credit Reports compiled for Mortgage purposes use a different credit scoring model (FICO) than those used for car dealers, credit card companies, etc.  Even those businesses that provide credit repair and credit improvement advice/services use a different credit scoring model than that used by Mortgage Lenders.

 

Although 3 Credit Scores are provided to Mortgage Lenders via the 3 Credit Bureaus ...

 

   3.   For Single/One Borrowers:  The MIDDLE Credit Score is the determining score used by Mortgage Lenders for qualifying for Credit Approval.  It is also the MIDDLE Credit Score that is used for Interest Rate Determination.

 

   4.  For Two or More Borrowers on a Loan:  The LOWER Middle Credit Score is the determining score for qualifying for Credit Approval and Interest Rate.

 

        An example of this scenario is:  A husband and wife apply for a Mortgage.  The LOWER of their two Middle Scores is the determining Credit Score utilized by the Mortgage Lender. 

 

   5.  The 3 credit sources/Credit Bureaus used for Mortgage Application are:  

 

      Experian, TransUnion, and Equifax.  The address and contact information for each Credit Bureau are as follows:

 

     EXPERIAN:

      P.O. Box 4500

     Allen, TX   75013

     Phone:  888.397.3742

 

     Model Used:

     Fair Isaac (Version 2)

     

     Credit Score Range:

     Low:  320     High:  844

 

     TRANSUNION:

     P.O. Box 2000

     Chester, PA   19016

     Phone:  800.916.8800

 

     Model Used:

     FICO Classic (04)

     

     Credit Score Range:

     Low:  309     High:  839

 

     EQUIFAX:

     P.O. Box 740241

     Atlanta, GA   30374

     Phone:  800.685.1111

 

     Model Used:

     FICO Classic V5 FACTA

     

     Credit Score Range:

     Low:  334     High:  818

 

   6.  A FREE Annual Credit Report is available at:

www.annualcreditreport.com

 

As you can see from the information provided above, Credit Scores ... and how they are compiled ... have many moving parts.  They are detailed and intricate in nature. 

 

And there are many "models" and methods in which Credit Scores are compiled.  That those models and methods evolve with regularity, only makes it harder for consumers to understand them. 

 

Adding to some consumers' confusion is this:  Even if all 3 Credit Bureaus have the exact same consumer account information available to them for scoring, the Credit Scores each reaches will vary.  It's important to also point out that each different scoring model and range of scores carry a different "weight" as to their credit scoring. 

 

Clear as mud, right??  

 

So, it's easy to see why the topic of Credit Scores is so misunderstood.  Why so many myths and fallacies surround it.   

 

It's also easy to see why, when it comes time to start preparation for mortgage financing and home buying, it's so very important to work with an experienced knowledgeable loan officer.  Your choice of loan officer matters greatly.

 

Again:  

  • Please check your Credit Report for errors or credit fraud (at minimum) once each year at the site mentioned above ... www.annualcreditreport.com 

Note:

  • Monitor your Credit Report more frequently, if you have concerns or if errors have appeared on a previous Report   
  • Performing this annual check will NOT hurt your credit scores!

 

And Remember:  Loan Officers do more than loans.  A good deal of my time as a Loan Officer is spent on the dispensing of credit information.  You should never be afraid to reach out to me should you have questions. 

 

Find and work with a Loan Officer that is well-versed in credit scoring.  But make sure you choose a Loan Officer that is also willing to devote the time to advise and assist you with credit improvement, should you need that assistance.  

 

It's far easier to address issues early in their existence ... and to have ample time for credit improvements and repair.  It's far less stressful too.

 

Myths Busted!

 

* Hoping to Buy or Refinance a Home in  New Lenox, Will County, Chicagoland - IL & WI?  In need of financing information and advice? 

Contact me! 


I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf.

I'm easily found at:

Gene Mundt
Mortgage Originator - nmls #216987 - IL Lic. 031.0006220 - WI Licensed #216987
 
American Portfolio Mortgage Corp. 
nmls #175656
 
Direct: 815.524.2280
Cell or Text: 708.921.6331
eFax: 815.524.2281
 
 
 
 

 

 

  

 Twitter Account of Gene Mundt, Mortgage Lender   LinkedIn Account of Gene Mundt, Mortgage Lender   Facebook Acct. of Gene Mundt, Mortgage Lender   Pinterest Acct. of Gene Mundt, Mortgage Lender   

   Gene's Chicagoland Blog/Gene Mundt, Mortgage Lender  

    

 

Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656

 

Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 

 

Your Referrals & Testimonials are Always Greatly Appreciated! 

 

Email Me .. to be added to my Mortgage & Real Estate Newsletter

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Elizabeth Weintraub is an author, home buying expert for About.com, a Land Park resident, and a veteran real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento, as well as tract homes in Elk Grove, Natomas, Roseville and Lincoln. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area with an emphasis on Elk Grove. Call Elizabeth Weintraub at 916.233.6759. Put 40 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. BRE License # 00697006.

The Short Sale Savior, by Elizabeth Weintraub, available with free shipping.

Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate. Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice; it could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.

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