Mortgage scores lower than actual scores

The scores you get from True Credit aren't "real" scores. I.e., nobody uses those scores to determine your credit worthiness. They're not FICO scores, which is what mortgage companies use.

This link may help explain it.

http://www.credit-repair-forums.com/thread3050.html

Jenna

 

Hi there. I work for a national mortgage company. I pull scores all the time. Our process is that we use a company called Credco. They in turn pull your score from the three repositories, Experian/Transunion/Equifax. We do in fact use the "median" score, or the middle score.

Also, from what I understand, paying off items or any major changes to your credit do not instantly make your score higher. In some cases, paying off a debt all at once can actually lower your score to some degree. Another thing that will affect your score is it being pulled too often in a certain time period. Any time you give out your social security number for a credit check, it will go on there.

Also, anytime you do manage to do something to make your credit better, your score will not necessarily rise significantly. The biggest change I believe that I have ever seen was about 40 points. But that was due to an error. The most I've seen are usually in the 5-10 point range at best.

And one final thought...I heard somewhere that the way the scoring system works will be changing in the future, if it has not already. As you are keeping an eye on your credit, this is something that you will want to be aware of.

 

FICO scores are driven by the "state" of the credit report used to calculate them. They have no access to "hidden" information, and they specifically do not use some information that may be on your reports such as address, employer, etc.

Paying off a normal revolving account should increase scores via reduction of debt to available credit ratio, assuming your credit limits stay the same.

Removing an account with some negative payment information, but a long history might either increase or decrease your scores, depending on the relative effect of the positively vs. negatively scored information.

Removing of erroneous completely negative information, such as an erroneous collection account, whether paid or not, should immediately improve your scores.

Paying off an installment account might not increase scores to the extent you would expect since that simultaneously reduces both your debt, and available credit.

Similarly, paying off, and closing, revolving accounts, could actually decrease your scores, since your available credit would drop, affecting your debt to available credit ratio.

Paying off a collection account might not immediately increase scores, since a recently paid collection account is still recent collection activity, but mortgage lenders might still require such payment to close on your loan.

Multiple inquiries from various mortgage lenders within a 30 day (old FICO), or 45 day (new FICO) period should also count as only one inquiry, to allow shopping for the best rate, again assuming they are correctly coded as mortgage inquiries.

Similarly, multiple inquiries from auto lenders within either 14 days (old FICO), or 45 days (new FICO), count as one, again assuming they are correctly coded as auto loan inquiries.

Inquiries from applying to open new credit accounts will generally lower your scores, mostly for the next 6 months to 1 year. The justification, other than statistical, is that multiple applications for credit in a short period indicates an attempt to seek a large amount of credit, which may be an indication of financial problems. It probably has the most effect if your credit history has some negatives, and your average account age is short.

Also the inquiries by your current creditors for your existing accounts should show as "Account Review", or not visible to others, even if they are pulled each month, since they do not represent applying for new credit.

Inquiries for employment purposes, or insurance, should NOT affect FICO if coded correctly.

Pulling your own reports should have no effect on your scores, as long as they are coded correctly, since they are not visible to others. Sometimes reports pulled thru credit monitoring services have been erroneously coded, depressing scores, so make sure they show as not visible to others.

http://www.myfico.com/CreditEducation/

 

I have also learned that some mortgage companies use a different version of TransUnion software for reports and FICO scores than myfico.com and that can cause a discrepancy in your scores. I can't remember the versions names, but this is also good to know. If you can wait a bit longer to get a mortgage, you will get better rates when midscores are above 580

 

Make sure the fraudulent accounts were not on the reports used by the mortgage broker to determine scores.

Make sure you have your id theft documentation available that you used to get the accounts removed (police report, fraud affidavit, and copies of CRRR notifications to OC, any CAs, and CRAs). If you are looking for mortgages you wouldn't want some new CA to reinsert a fraudulent account just as you are about to close, and demand payment expecting you can't close without their OK.

You would want to be ready to notify the CRA that it is reinsertion of a fraudulent account they already removed, to expedite quick removal, and possible rescoring based on your documentation, if necessary. You would also want to be prepared to turn the matter over to an attorney to recover damages.

 

You may also be getting some FICO decrease on the second pull from the earlier pull, if they were over 30 days apart.