When we talk about our credit scores, we are referring to the three scores calculated on the information stored by the three major credit reporting agencies in the U.S. and Canada: Equifax, Experian and TransUnion.  Rarely are these scores exactly the same because of different information in your credit file at each of the three bureaus and also due to slight variations of the credit scoring formula being used by each bureau.  More info on why scores are different is in this article.

Common misconceptions about credit scores and loan qualifications include:

-Only one score is used when applying for a loan.

-The three credit scores are averaged to get your lending score.

-The highest score is used for loan approval.

-The lowest score is used for loan approval. 

The answer is NO, not usually are any of these the case.  Some companies may only check one of your scores, however, typically all three are checked for a major credit purchase such as a mortgage.

When you apply for a mortgage, your lender will almost always look at all three of your credit scores.  The middle score, or Mid Score, is the one that mortgage lenders use to determine credit score eligibility.  If you only have two scores, they will almost always take the lower of the two to use for loan decisions.

If all three of your scores are above the required minimum needed for loan approval, that’s great.  If one score is much higher than the other two, and those two are below the minimum required, it can be an obstacle as you go through the lending process.

WHAT TO DO

Check your own credit scores.  Make sure you are getting FICO scores, the ones that the majority of lenders use.  All the other scores that are heavily advertised and promoted on TV and online are NOT the same as FICO scores.  At this time, consumers can only access two of their three FICO scores themselves.  The good news is that checking your own reports and scores does not count against you as it is considered a Soft Inquiry.  Contact us for current discounts on FICO reports and scores.

You can also get a copy of the three credit scores when you apply for a mortgage.  The lender will check, or pull, your credit file and is required to give you the Score Disclosure Page with your scores on it.  Anytime you apply for any loan, it is a Hard Inquiry and counts against your score.

The best thing to do is to be sure that everything on all three of your credit reports is accurate.  About 79% of credit reports have errors on them and those errors often have a negative impact on scores.   Get your own reports here.   Read this article for information on how to dispute the errors you find.  For an in-depth analysis of your credit reports, contact us today for a Credit Check-up.  It may be the best $100 you ever spent.

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