Your FICO Score and Your Mortgage

Welcome to my guest blogger, Sue Baxter, who is a mortgage banker out of Connecticut. Thought her message would be of interest.

- Brian

When is your credit score irrelevant in buying or refinancing a home?

The only score that matters is the one your lender uses to determine your creditworthiness, not some random score you got on a website. There are websites all over the internet trying to get you to order a report and get your FICO score. Many clients call me and tell me what their credit score is based on Credit Karma or a service their credit card company might use. This might be interesting as it may notify you of any red flags and can give you a ball park idea of your score. These scores however will not affect the interest rate you are being quoted or even whether your loan will be approved or denied.

There was a law suit that was settled between the CFPB (Consumer Finance Protection Bureau) and Experien where it was alleged that the credit bureau “deceptively marketed credit scores to consumers” by misrepresenting them as the same that their lender would use. You’ve seen the online ads and you’ve probably even ordered your own credit for free, only to find that you have to actually pay to get your credit score. They usually come with an offer to apply for a “preapproved credit card” or some sort of identity theft protection/credit monitoring system or credit monitoring system. One site might say your score is 780, ranking you as excellent. But when you go and apply for your loan, your middle score (lenders pull from three agencies and use the middle score), might be a 719. That’s a sizable swing that may not affect your approval in this case, but can certainly affect your rate.

Some good news on the credit front? In July credit agencies will stop reporting civil judgements and tax lien information on public records. Both of these have serious negative impacts on FICO scores. This is a great benefit for the consumer, but certainly of concern to bankers.