Myth-Busting Mortgage Credit Scoring

By
Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI
https://activerain.com/droplet/5cdX

 

 

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
 
 
 
 

 

 

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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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Re-Blogged 8 times:

Re-Blogged By Re-Blogged At
  1. Fred Griffin presently on Leave of Absence 05/12/2018 01:12 PM
  2. Debe Maxwell, CRS 05/13/2018 09:44 PM
  3. Michelle Carr Crowe,Altas Just Call...408-252-8900! 05/13/2018 10:30 PM
  4. Barbara Todaro 05/14/2018 04:01 AM
  5. Elizabeth Weintraub Sacramento Realtor Top 1% 05/15/2018 10:03 AM
  6. Roy Kelley 08/14/2018 01:00 AM
  7. Gita Bantwal 06/01/2018 08:26 AM
  8. Gabe Sanders 05/24/2018 11:00 PM
Topic:
Lending / Financial
Location:
Illinois Will County Joliet
Groups:
Mortgages
Chicago-Northern Illinois Real Estate
Consumer Mortgage Tips
Bananatude
WillCounty
Tags:
credit
credit history
credit scores
myths
credit advice
credit education
credit scoring models
credit and credit repair
mortgage lender advice
credit card fico scores
mythbusting
3 major credit bureaus

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Ambassador
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Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

Another grat post Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi  on credit scoring

May 12, 2018 08:33 AM #6
Rainmaker
194,864
L. Scott Ferguson
Ask4Ferguson - Your House-SOLD Name in Real Estate - West Palm Beach, FL
Sunny Florida Real Estate Professional

Gene!

Awesome post, chock full of awesome info!  I'm bookmarking this!

Scott

May 12, 2018 09:21 AM #7
Ambassador
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Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Gene, I still don't understand why when I have an 841 credit score that when I buy another rental condo that becasue of the inquiries my credit score drops. It makes no practical sense since I am only opening one more line of credit, a mortgage.

May 12, 2018 10:20 AM #8
Rainer
261,882
Stephen Turner
Gemcraft Homes (TriCorner Realty) - York, PA
The BIG Guy of NEW HOME SALES

Gene, great resource and I appreciate you sharing this. What a great overview of the credit scores, and its impact on people. 

May 12, 2018 10:31 AM #9
Rainmaker
303,133
Kate McQueen
CB&A Realtors - Cypress, TX
Tailored service for your real estate needs!

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi There are so many myths surrounding mortgage lending and home buying in general, and it's always good as a real estate professional to educate yourself and be prepared to help correct inaccurate beliefs surrounding mortage loans.  

However the one that still grabs me is "will my credit score be damaged if I check with more than one mortgage lender?"  I no longer know for sure how to answer that question.

May 12, 2018 11:29 AM #10
Rainer
502,413
Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH
CRS

Love this article!!!

Awareness of your Credit Scores (resulting in the improvement of your credit and Credit Scores) can improve your life and save you money. 

 

May 12, 2018 12:49 PM #11
Ambassador
2,345,039
Fred Griffin presently on Leave of Absence
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

 Hello, Gene.

   This is THE definitive post on credit scores.   Thank you!

May 12, 2018 12:51 PM #12
Ambassador
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Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Thank you, Brotha Gene! I will certainly give you the credit for penning it as well!

Happy Saturday!

May 12, 2018 03:11 PM #13
Rainmaker
1,280,858
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Hi Gene,
What an excellent post.  So glad it was Featured but I saw it on Fred Griffin's reblog.  Have an amazing day!

May 13, 2018 07:15 AM #14
Rainmaker
2,944,674
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of Manchester NH's Leading Agents

Wonderful update as most consumers are confused when it comes to credit scores Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi 

May 13, 2018 11:53 AM #15
Ambassador
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Michelle Carr Crowe,Altas Just Call...408-252-8900!
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

Thank you for writing this truly informational post on credit scoring. Re-blogging!

May 13, 2018 09:59 PM #16
Rainmaker
4,876,217
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi this is a prime post to be reblogged.... great detailed content here.... thanks for posting...

May 14, 2018 03:59 AM #17
Rainmaker
3,178,090
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Gene glad this post got featured, needless to say there has been a great deal of re-blogging before it hit the Gold Star, keep up the great content, Google will find you:)Endre

May 14, 2018 10:07 PM #19
Rainmaker
3,192,433
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Excellent information Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi ...a score is so much more than just a number and raised...can open soooo many doors !

May 15, 2018 02:16 AM #20
Rainmaker
394,837
John Wiley
Right Move Real Estate Group- EXP Realty - Fort Myers, FL
Lee County, FL, ECO Broker, GRI, SRES,GREEN,PSA

Many consumers are misinformed and/or confused about Credit Scores.

Your post is excellent reading to help get the myths busted.

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi is a professional that knows what it takes to properly care for the consumer.

May 15, 2018 04:40 AM #21
Rainer
389,293
Anna Hatridge
Goodson Realty - Farmington, MO
Missouri Realtor with Goodson Realty

excellent information!  thank you.

May 15, 2018 09:27 AM #22
Rainmaker
2,189,295
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

Definitely worthy of a reblog, Gene, and in fact, I will do that right now! I'm sure my readers in California will benefit from your vast knowledge. Thank you!

May 15, 2018 09:55 AM #23
Rainmaker
5,270,958
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Congratulations on your feature recognition. This is excellent advice to share.

May 15, 2018 11:15 AM #24
Rainmaker
4,796,551
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Thanks, Gene. Great info for anyone interested in credit scores.  I currently have them all frozen after the Experian hack.

May 16, 2018 04:51 AM #25
Rainmaker
806,028
Lanre-"THE REAL ESTATE FARMER" Folayan
Keller Williams Select Realtors-Buy a home in Washington DC. Sell a home in Washington DC - Bowie, MD
I don't make promises.I deliver results.SOLD HOMES

Gene I am trying to educate myself more on Credit. So I found this article very helpful. You learn something new everyday. Thanks for sharing.

May 29, 2018 05:23 PM #26
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708.921.6331 - 40+ yrs experience
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