Round Two of information provided to me by my contact at Coldwell Banker Mortgage to assist buyers in separating the FACT from the FICTION in credit scores and lending...
Fiction: The credit score on my consumer credit report should be the same as the one the mortgage company returns.
Fact: When mortgage companies order a credit report the credit bureau will include a “mortgage adjustment” that is factored into your score. These adjustments are not controlled by the mortgage lender, but by the credit bureaus themselves. This adjustment takes a your past mortgage history into account and will reflect accordingly in the credit scores returned to the lender. For example, a customer with an extensive clean history of mortgage payments will have a different adjustment than a customer who has never had a mortgage in the past.
Fiction: There is nothing I can do to fix errors on my credit report.
Fact: If you have errors on your credit report you have the ability to file a dispute with the credit bureau to correct the erroneous information. You can go to www.annualcreditreport.com and obtain a free copy of your credit report. You will need to submit documentation supporting your claim that the information reported is erroneous, and the credit bureau has 30 days to confirm the information and update the repositories.
Fiction: My score will drop if I apply for new credit.
Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called “inquiries”) will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score as stated above.
Fiction: A poor score will haunt me forever.
Fact: Just the opposite is true. A score is a “snapshot” of your risk at a particular point in time. It changes as new information is added to your bank and credit bureau files. Scores change gradually as you change the way you handle credit. For example, past credit problems impact your score less as time passes. Lenders request a current score when you submit a credit application, so they have the most recent information available. Therefore by taking the time to improve your score, will put you in better position to get approved for a loan.