Taking The Mystery Out of Credit Score Calculations

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/5jwl

 

 

Taking The Mystery Out of Credit Score Calculations

 

Credit ... Credit Building ... Credit Repair ... Credit Reports ... Credit Scores ... Credit Scoring ...  

I feel a bit like Bubba in Forrest Gump at times when I speak or write of credit-related things ...

 

 

Why?  

Because such a large number of the questions I receive as a Chicagoland Mortgage Originator revolve around credit and credit topics.   And rightfully so, as credit ... and all things reliant upon credit ... make our world go 'round. 

 

Our credit and our credit standing (via Credit Scores) affect everything about our lives.  From simple and modern daily needs like acquiring cell phones and securing insurance ... to important life needs.  

 

Stop and think about it ... 

 

In this modern age, housing (rental and purchase), employment, security concerns (licensing demanded in many professions), auto loans, credit cards, application for utility services, building savings, and more are often based on having credit.  And in many circumstances, that credit must be good (or at least "adequately good"). 

 

Given its importance then, it's only natural that questions concerning credit abound.  And it's why I address the topic of credit in so many of my blog articles.   

 

Here's just a sample of the wide range of credit-related info I've focused on in the past: 

 

 
 
But one of the questions I hear most often is, "What is the highest Credit Score available?"  Well, unfortunately, providing a quick and easily understood answer isn't simply done.  Here's why ...

There are 3 Major Credit Bureaus:
 
 
Each of these credit bureaus is a business and not a service as often referred to.  In fact, each has its own methodology and model for calculating their separate and independently created credit scores.  Their individual and independent methodologies have a RANGE of scoring unique to their own knowledge of your personal credit history.
 
I was reminded of this fact just recently ... 
 
A potential client looking to refinance their loan with me was under the impression that he had excellent credit.  He touted, prior to our running his credit report, that his credit scores would certainly be categorized as "the best credit scores available".  Of course, immediately upon saying this, he then quizzed me as to what that credit score number would or could be?  
 
Not trying to sound evasive, my honest answer reiterated my message above.  "Unfortunately, providing a quick and easily understood answer isn't always simply done.  And here's why.
 
 
 
Residential Mortgage Credit Reports are unique to other industries that use credit analysis. 
 
Other industries such as car dealerships, and their representative banks offering their auto financing, utilize different scoring models.

For Mortgage Underwriting purposes, the scoring ranges from the 3 Major Credit Bureaus (Experian, TransUnion, Equifax) are:

  1. Experian:  Scoring Models range from 300 to 850, low to high
  2. TransUnion:  Scoring Models range from 309 to 839, low to high
  3. Equifax:  Scoring Models range from 334 to 818, low to high
 
 
To complicate matters for borrowers and the public, even more, certain "Businesses" that offer credit repair or credit services can also have a different rating scale that they use.  Some of those businesses include credit card companies that offer a "free" credit score to their customers within their monthly statement.  
 
Hopeful Borrowers contact me thinking they already know their credit scores, based upon the "free" credit card company score they've received from one of these sources.   All too often, those "free" credit scores do not represent anything close to the scores a Mortgage Lender will utilize during their mortgage application.
 
As you can see, the question regarding "best credit scores available" is not answered quickly or easily ... or even with one simple number.  That number is dictated by the originator of the credit request, as well as the purpose of that request.  That number is dependant on who is asking and for what purpose.
 
So when it comes to seeking and obtaining a mortgage in order to finance (or refinance) a home or investment property, you need to go to THEE source for your funds in order to gain an answer regarding your credit scores or "best" scores available.  In most cases, that will be a Mortgage Originator/Lender.
 
I'll add to that advice:  Because a Mortgage Lender's scoring model is the one that you will be dependant on for your financing and financing terms, it's wise to seek a consultation with an Originator early in the purchase (or refinance) process.  That way you have the facts as they pertain to your credit scores.  
 
You'll also have time to raise credit scores if needed or correct any errors that may appear on your credit report.  This early action on your part can save you big money, as well as time and frustration later. 
 
Get all your credit questions ahead of time and be fully prepared and equipped to utilize the best credit scores available ... and the best mortgage terms possible ... for yourself. 
 
Reach out to me today ...
 
 
* When in need of credit, Mortgage info, or mortgage service when buying,  refinancing, or investing in a home in New Lenox - or elsewhere in Chicagoland - IL & WI, contact me.
I'll be happy to 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
 
American Portfolio Mortgage Corp.
NMLS #175656
 
 
Direct: 815.524.2280
Cell/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 1 time:

Re-Blogged By Re-Blogged At
  1. Sally K. & David L. Hanson 05/29/2019 08:10 PM
Topic:
Lending / Financial
Location:
Illinois Will County New Lenox
Groups:
Mortgages
Buyer Information - What Buyers Need to Know in Today's Market
Advice for Buyers
Bananatude
WillCounty
Tags:
credit
mystery
mortgage consultation
credit scores and report
talk to a lender
prequalification for mortgage
mortgage advice and tips
credit calculations

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Rainmaker
1,158,922
Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

Another excellent post, Gene and very informative. I can't count how many times when asked clients say they have great credit with no real knowledge of how it applies to their situation. I shall be using this.

May 29, 2019 03:23 PM #2
Rainmaker
3,241,794
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Gene - you help shine light on a subject that is often clear as mud to many.

May 29, 2019 05:14 PM #3
Rainmaker
1,217,833
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Love getting The Banana, Kathy. Thanks so much!
Gene

May 29, 2019 06:29 PM #4
Rainmaker
3,188,377
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Uh oh...I feel a bookmark...wait ...a reblog coming on !

May 29, 2019 08:09 PM #5
Rainmaker
1,510,674
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

With so many credit scores for so many purposes, it's no wonder the general public is confused. My son is thinking of making a purchase and I'm worried that his FICO score may be low - because he makes a good living and paid off his house, his vehicles, and his new boat. His scores may have suffered because he is presently lacking debt... As if that isn't crazy.

May 29, 2019 08:10 PM #6
Rainer
471,164
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

It's a shame that our educators don't have any money management curriculum for seniors in high school. Most parents are inept and lack fundamental knowledge to teach their children the importance of money management and the use of credit to finance debt.

Simple courses such as checking and savings accounts and interest rates would be so helpful for young adults.  

May 29, 2019 09:40 PM #7
Rainmaker
3,174,842
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Gene another wonderful and informative post, you should charge for this wisdom, Endre

May 29, 2019 11:26 PM #8
Rainmaker
1,404,170
Kat Palmiotti
Grand Lux Realty, Monroe NY, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

There is often a disconnect between what people believe their scores are, and what those scores actually are. Very helpful information!

May 30, 2019 02:51 AM #10
Rainmaker
2,975,713
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

The whole credit scoring system is so complicated I've never understood how the average person can sort it out. Thanks for shedding some great light on this issue, Gene. It's a masterful post.

May 30, 2019 04:07 AM #11
Rainer
501,308
Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH
CRS

Great information!Each of these credit bureaus is a business and not a service as often referred to.  In fact, each has its own methodology and model for calculating their separate and independently created credit scores.  Their individual and independent methodologies have a RANGE of scoring unique to their own knowledge of your personal credit history.

May 30, 2019 04:11 AM #12
Rainmaker
1,960,897
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Southlake, TX
Selling Homes Changing Lives

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi - You always do an excellent job educating the public. This is a really good summary credit scores and it's so important.

You're the Pro and I admire you so! 

May 30, 2019 05:56 AM #13
Rainmaker
1,278,513
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,
Great explanation of the various way credit scores are calculated.  Thank you for taking the time to unravel some of the mystery and confusion.

May 30, 2019 06:01 AM #14
Rainmaker
3,168,586
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Gene. Kudos to you on this post. See it was featured or would have nominated it for Carol Williams Second Chance series! Enjoy your day!

May 30, 2019 06:33 AM #15
Rainmaker
2,424,479
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

The credit score age...This supposedly replaces the handshake of old.....Now its rules, regs and punishment if you dont play nice. Oh to be debt free...

May 30, 2019 06:45 AM #16
Rainmaker
1,847,567
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi -  you have taught me more than I thought I knew about scores.  I guess banks promoting seeing your score are like Zillow and zestimates.

May 30, 2019 07:40 AM #17
Ambassador
2,801,840
Anna Banana Kruchten CRB, CRS 602-380-4886
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana!

Hi Gene this is a must read primer for anybody who wants to learn about credit scoring! It's like a maze to most folks and you've make it easy to understand exactly where the 'cheese' can be found!

May 30, 2019 09:03 AM #18
Ambassador
3,914,946
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi Gene:

This is another terrific educational post on a topic confusing to most. Thanks! I plan to share it.

Jeff

May 30, 2019 04:51 PM #19
Ambassador
1,807,077
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

I may send this to my daughter. I've explained to her how good credit is like a secret weapon. It opens doors. Thank you for making this topic understandable. D

Jun 01, 2019 07:51 AM #20
Rainmaker
3,174,842
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Gene loved this post indeed the mystery is unraveled in your post. More importantly the advice you gave start with a Mortgage Originator early is spot on...Endre

Jun 06, 2019 11:29 PM #21
Rainmaker
2,735,146
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Exactly right and please do not use credit repair people. It’s better to have that and then pay it off then to try to avoid paying it. :)

Jun 11, 2019 12:08 AM #22
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Rainmaker
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi

708.921.6331 - 40+ yrs experience
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