The Smooth Loan Process #2010-03

Why Is Your Credit Score Different Than Mine? Most of us are familiar with the three major credit bureaus. Experian, Equifax and Transunion. Most of us are equally familiar with credit scores. After all, it is our report card for grown ups. But did you know that your credit score might be different depending on who pulls your credit? I had a client a few months back that had his credit pulled three times in one day. Once by me, once by him and once by another bank. We all pulled different credit scores! Here's why: The consumer credit report that you can get on your own from an online credit report company like uses a different scale than creditors use. The consumer credit report ranges from 400 at the bottom to 900 or sometimes 1000 at the top depending on the company. The scoring scale for creditors starts at 300 and only goes up to 850. So the exact same credit could get a 700 score on one report, but only 650 on the other. Confusing? Wait, it gets worse. The credit bureaus have different versions of the scoring modules that determine the score. For example, Transunion has at least four versions of the FICO score (FICO is the brand name of the scoring module). Each creditor can choose which version of the FICO score they want to use. It is generally accepted that FICO Classic version 04 is used for mortgages, but not always. There is a big bank out there that uses version 02 for their loans. The difference between the two can be about 25 points on your score. That can be very expensive for your loan if you are knocked down a credit tier because of the scoring module that gets used. So, if you're pulling your own credit report because you want to know your credit score, take it with a grain of salt. It might be different when your loan officer pulls your credit. The Smooth Loan Process Lesson for today is that the most important thing about credit is to make sure the data on your credit report is correct. If there is incorrect data, we can work together to correct it and raise your score (but that's another episode). Harold Perkins The Mortgage Advantage 480-831-1588 harold@aztma.com