Are Some Credit Reports "Fake News"?

By
Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI
http://actvra.in/52ys
 
 
Are Some Credit Reports "Fake News"?


Per a Housing Wire report, Experian (one of the 3 major credit bureaus) was fined $3 million for representing that their "purchased" credit scores were the same scores used by Lenders for Mortgage Underwriting decisions. (Housing Wire article link)

Their consumers were, (and I am paraphrasing), "receiving the exact same credit scores that Mortgage Lenders use to make loan and credit decisions".  This, they promised, would prove to be a great advantage to these consumers as they started their home shopping and mortgage search.

 

The CFPB (Consumer Financial Protection Bureau) found Experian's sales approach very misleading ... because it was.  They took appropriate action and Experian must now pay for having performed their business in this manner.

The sad outcome of these headlines:  Experian's actions may create further distrust of the credit and financing process.  And that, in turn, may further increase the misconceptions and fears many consumers have surrounding credit scores themselves.  

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Credit scores (and credit scoring) can be a very beneficial tool for consumers.  But they're rarely viewed as such.  Too often, consumers hold a negative view of credit scores and scoring ... and they don't understand how they function or how they can benefit them.  

Because of this view:  Many potential mortgage clients fear their credit scores being pulled when it comes time to seek financing.  I find this to be true with my mortgage clients, whether the client has good or poor credit ... or falls somewhere in between. 

Many believe if credit scores are pulled, they'll take an adverse hit. No matter the truth or their particular circumstances, it can be hard to convince them otherwise.

To their defense:  It's easy to understand why many believe this to be a fact. It's not uncommon to hear stories about this having happened. 

And it's true, depending on the timing of the credit pull and the specific financial/credit circumstances of the client, there can be some impact seen on scores. But typically, if any impact occurs, it's minor.

It's also true:  Needless inquiries on credit scores should also be avoided. The same goes for multiple inquiries. Too many inquiries made in a short period of time can prove detrimental to credit scores.


But currently:  Much of the mortgage pre-qualification and approval process rests upon credit scores.  It's absolutely essential for an LO to pull a tri-merge Mortgage Credit Report in order to provide clients credible advice and an opinion as to the "approvability" of their financing. 

Without having credit scores pulled and to rely upon, the reliability of any Approval is weak. It's what could be currently referred to as "fake news" ...

Factual credit scores matter ... and Experian should have known that. 

Consumers also need to be aware and know how their credit scores affect their mortgage "approvability", the mortgage programs available to them, their interest rate, and more ... 

Working with a New Lenox - Chicagoland Mortgage Originator that is thoroughly educated and sensitive to how credit scores work and affect their clients' financing is vitally important too. Receiving the correct credit advice can mean monetary savings for a Borrower. It can mean the difference between a fluid successful home buying experience and mortgage processing ... possible delays ... or even failure. 

When you hope to finance a new home (or refinance your present one), it's no time to rely on "fake news" ... credit scores received from sources that cannot be used in your Mortgage Underwriting Process or for Mortgage Approval. 

Let's talk today. Together's we'll discuss the most opportune time to pull your credit scores. Then relax and follow my expertise and guidance moving forward. I have your back and want you to successfully close your loan. 

 

 Contact Me to Find Out More!

 

            
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Gene Mundt
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Gene Mundt

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Jeff Dowler 03/29/2017 08:46 AM
Topic:
Lending / Financial
Location:
Illinois Will County New Lenox
Groups:
Mortgages
Chicago Area Real Estate BUZZ!
1st Time Buyers
Consumer Mortgage Tips
Bananatude
Tags:
experian
credit reports
mortgage advice
pulling credit
fake news

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Ambassador
3,247,861
Jeff Dowler
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude - Carlsbad

Hi Gene

Thanks for more excellent education about credit scores. I'm glad to see Experian was caught and fined for this deception. Makes you wonder what else might be going on!

I thnk lots of people are wary of the credit reporting process, and perhaps with good reason.

Jeff

Mar 29, 2017 08:37 AM #25
Rainmaker
607,190
Mike Bjork
American Pacific Mortgage - Redondo Beach, CA

Great post, Gene!  I love the play on "fake news".  I was pleased to see the CFPB take action on the Credit Agencies, like Experian, on their misleading marketing gimmicks.  They truly were ripping off the Consumers.  It's a bit frustrating to explain to Consumers that the scoring model between what Mortgage Lenders and what they pull from the Credit Agencies are different (even though, they call it FICO).

Mar 29, 2017 08:58 AM #26
Rainmaker
542,311
Nick & Trudy Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtors, Philly Main Line

Great post and something all consumers need to understand

Mar 29, 2017 09:27 AM #27
Ambassador
868,368
Mike Frazier
Carousel Realty of Dyer County - Dyersburg, TN
Northwest Tennessee Realtor

Credit scores are here to stay. I just got my daughter a credit card to help her build a score.

Mar 29, 2017 10:28 AM #28
Rainer
19,851
George DiGregorio
Zenith Mortgage Advisors - Hopkinton, MA

   The big issue I see is that consumers aren't aware that there are different models for credit scoring. The model you get from your credit card company or online agency typically isn't a Fair Isaac FICO that a mortgage lender uses. It is usually a Vantage Score or Tru-Credit score, you need to read the fine print on the bottom of the report. They aren't quite as different as say, Fahrenheit and Celsius, but they aren't as close as the companies selling them would lead you to believe. I see this constantly from clients who are surprised that the score they have and the one I give them are 60 points apart. For those of you not aware, on conforming loans, rate pricing changes for every 20 point bracket under 740 with most lenders. There is a big pricing difference between a 720 and 660 FICO.  It's just one more example of why you need to find a competent mortgage professional when navigating the maze of modern mortgage financing.

Mar 29, 2017 10:30 AM #29
Rainmaker
202,622
Doug Kaller
Academy Mortgage, Reno, NV - Reno, NV


I have seen scores from Experian or Credit Karma that are more than 100 points higher than the scores we pull. I have also had instances where the Credit Karma results are identical to the report I ran. They seem to use various algorithms. If their scores were always 50 points higher, we could easily explain this and prepare our clients. Since there isn’t any consistency, all you can do is try to prepare your client that your score may be significantly lower.

 

Mar 29, 2017 10:32 AM #30
Rainmaker
1,548,253
Carla Muss-Jacobs, Principal Broker (503) 810-7192
BuyersAgentPortland.com | Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% of the Time - Portland, OR
Buyer Focused ~ Buyer Results

So, it's like the Zillow of credit scores?!?  LOL

Always, ALWAYS best to pull scores/reports via a lender!   

Mar 29, 2017 12:52 PM #31
Rainmaker
3,097,454
Dorie Dillard
Coldwell Banker United Realtors® ~ 512.346.1799 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good evening Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi ,

Congratulations on your well deserved featured post! I appreciate you getting the word out as I did see this story and was shocked Experian thought they'd get away with this.  The fine should definitely be higher.

Mar 29, 2017 05:14 PM #32
Rainmaker
113,395
Melissa E. Spittel
Coldwell Banker Residential Brokerage - Westminster, MD
"Achieving Results Together "

Good ol' credit scores. Seems a lot like consumers who trust Zillow for home  values. I've recently been contacted by buyers who "have great credit" because they checked it on Credit Karma. Alas, after contacting a lender, they learned otherwise. Indeed, there is an abundance of "fake news" out there.

Mar 29, 2017 06:32 PM #33
Rainmaker
479,926
Debra Leisek
Bay Realty,Inc Homer Alaska - Homer, AK

Very interesting article...as usual you have  provided some really clear facts regarding lending and credit. Thank you!  I also agree with Randy Mitchelson, APR the fine should have been more... what a great breakdown on Experian profit with no real loss on this fine.

Mar 30, 2017 12:03 AM #34
Ambassador
1,130,445
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

I am very happy wiht the enforcement that the CFPB has done to protect the individual consumer and hold corporations accountable.

Mar 30, 2017 08:03 AM #35
Rainer
271,995
Thomas McCombs
Century 21 HomeStar - Akron, OH

There should be some easier way to force the reporting bureaus to better investigate and correct erroneous items on a report.

I would think that a small claims court action would make a big difference if permitted. One of the problems is in establishing damages, as a denial of credit is hard to quantify, but a recognized standard damage amount might be helpful.

Mar 30, 2017 08:40 AM #36
Rainmaker
2,376,232
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale - Probate Broker

I do not trust credit bureaus.  Period.  I do see the need for reporting and why lenders need to see credit reports.  There is too much happening in the world today that harms people.  Wells Fargo comes to mind and now this. And we know there is more ... it just has not surfaced ... yet. 

Mar 30, 2017 09:20 AM #37
Rainmaker
325,207
Donna & Larry Johnson
Keller Williams Real Estate - West Chester, PA
Chester & Delaware County

I agree because I have seen so many mistakes over the years.

Mar 31, 2017 09:01 AM #38
Rainmaker
1,265,690
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Area Real Estate

I wish I could say poor Experian but I can't. No matter what you have to get an accurate financial picture & that means a tri-pull credit run.

Great post Gene. Your clients will be happy with your expertise.

Mar 31, 2017 11:19 AM #39
Rainer
61,058
Brian DeYoung
Realty USA- Howard Hannah - Ithaca, NY
Brian DeYoung

The process favors people who USE credit not the person with the best ability to pay.

It is an odd system, all of them. Thank you for the information about Experian. As a person who pays on time, has veruy low debt, but does not use a credit card, my score is typically lower than people I know who have cards and are in a great deal of debt. Maybe I should buy a score...

Mar 31, 2017 07:16 PM #40
Rainmaker
1,178,596
Jon Kolsky
Kolsky Realty & Management - Long Beach, CA
Licensed California Real Estate Broker

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi ~ I expect it from DT. But Experian? Now that's scary on all fronts

Apr 03, 2017 11:45 AM #41
Rainmaker
354,007
Travis "the SOLD man" Parker; Associate Broker
Team Linda Simmons, Enterprise, AL 36330 - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

I've heard there are SEVERAL "Official" scores depending on what the use is for. A real nightmare!!

Apr 03, 2017 12:15 PM #42
Rainmaker
823,374
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

You write about a huge element in the finance world today - trust.  Consumers need to feel confident that they have a good source of information, so what Experian did was provide a deep mistrust! 

Apr 03, 2017 09:30 PM #43
Rainmaker
3,129,823
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Gene

Very interesting post on credit report.

Good luck and success.

Lou Ludwig

Apr 08, 2017 07:43 PM #44
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