Borrower : I would like to see this specific home...
Realtor : Have you spoken to a loan officer?
Borrower : No, not yet.
Realtor : Do you know your credit scores?
Borrower : Yes, I pulled my credit online and I have a 680, 705, and a 695, so I should be good to go, right?
Realtor : Those are very strong scores, so let's look at a few houses and then I can get you qualified.
People, it's not that simple. I have seen buyers pre-qualified primarily based on their credit scores, yet the loan officer or realtor didn't review the credit properly, which can still kill a deal at times. But the reason I am bringing this up is because I have seen a few blog posts written with many comments, all stating that they ask the borrower their credit scores. And if these scores are high enough, that they feel comfortable with this buyer and will take them out first, even before they speak to a loan officer. And I know some of you will disagree with me on this topic, because you all have your own way of doing things. But many forget, real estate is local and maybe in some high end markets, you can get away with this and get lucky. But I need to point out one harsh fact to those that think credit scores from online sources are reliable.
Reality : When you go online and use a credit company that is not pulling your credit for a mortgage company or a bank, it's considered a 'generic' credit pull. Meaning that it follows no rules, guidelines, or input regarding mortgages. When you go to a lender for a mortgage or a car company to purchase a car, they have credit agencies that use certain algorithms that are different from those credit repositories. These credit repositories are the 3 major credit bureaus; Experian, Equifax, and Trans Union. The credit scores from these three major credit repositories will differ from those when pulled my a mortgage company and bank when applying for your mortgage. Yes, there are other reasons that just the algorithm, such as how information is reported and or received. But the main point is that they can be very different, confusing, and frustrating.
Example : I have been working with a buyer for the last 5 months now who started off with 574, 595, and 581 credit scores when I pulled them internally. He was upset because he pulled his scores from online and they were 666, 697, and 683. WOW... huge difference, right? I had another client that was about 45 points higher than what my scores showed. And no, it's not the credit agency that we use internally, because this same person had another lender pull them and the scores were the same as mine. Hence the specific algorithm that is used when it comes to credit reports for mortgages.
Disclosure : I don't work for a credit agency nor am I a credit export. I do have extensive knowledge of credit and credit scores aka fico scores. And I am sure this is not as detailed as it could be with more specifics, but I did want to educate people on the basics. And I did interview several different people from different credit agencies and the main ingredient is that mortgage credit reports will give a different result in credit scores than if you just went online and pulled your credit yourself. The online services are mostly for individuals to check their credit, to make sure it's correct, and to help stop identity theft. One problem is that you see/hear commercials from credit agencies telling you that you can check your credit for free, to know your credit scores for when buying a home, etc, etc. But they don't explain the differences, because it's a service that they want you to pay for, even though they mention the word 'free'. Just beware, be careful, and educate yourself properly.
Good enclopedia of terms regarding credit - The Credit Report Enclopedia -
~ Credit Score Series ~
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