Is my FICO score really what’s used to get a mortgage?
Posted in Renting & Real Estate on 06/25/2009 10:08 pm by admin
SoCal G asked:
My wife and I are going to buy our second home. We’ve been in our current home for 15 years and have good equity. My sister who works for in the credit industry told me that the FICO score generated by the 3 bureaus is only a CONSUMER score and that the actual score used for a mortgage will be lower. For example, I know my current FICO is about 725. She claims it will actually be lower when a mortgage company runs my credit which could affect how much of a loan we get and the interest on it. Is this true???
My wife and I are going to buy our second home. We’ve been in our current home for 15 years and have good equity. My sister who works for in the credit industry told me that the FICO score generated by the 3 bureaus is only a CONSUMER score and that the actual score used for a mortgage will be lower. For example, I know my current FICO is about 725. She claims it will actually be lower when a mortgage company runs my credit which could affect how much of a loan we get and the interest on it. Is this true???
Please no personal opinions, cite references or industry experience if possible
Thanks to the early responses. We are very fortunate with debt/available credit.
We have 4 c/c’s each with approx $15-$20k limits and zero balance on all. We use them occasionally to keep some use going but no balances. They are all old accounts, about 4-15 years. No car loans. The only loan is a student loan with about $7k on it.
SAMUEL
06/26/2009 at 5:26 am
CLARK
Creditors do run a slightly different report. I ran into this in the car industry too. But beyond your score (and anything around 700 and above is no worry anyway) though lenders look at your debt and debt-to-income ratio’s.
They also look at how close to the max you are on your current credit debt. So if you’ve got any cards that are close to max, try to pay them down over the next month or so to below 50% of yout limit.
Also, another new twist in the game is that some creditors are actually lowering the available credit limits on people’s cards without telling them, which then raises their debt ratio above that 50%. For instance, you have a card that had a credit limit of $5,000. You have $2,000 on it. Which is only 40%. The credit card company arbitrarily lowers your limit to $3,000. Now you’re 66%. This lowers your credit score.
I think there might be some lawsuits pending soon about this type of behavior but until then it’s something to watch out for on your monthly statements.
06/26/2009 at 9:00 am
MATT
It’s true that there are differences between the consumer scores and the one used by a lender. But they’re really pretty similar. What you should do is have a mortgage broker pull your credit and analyze it for you. You should look at it too, to pick up any obvious errors. Most credit reports have some errors on them.
Also, your FICO score isn’t the only thing that determines how large a mortgage you can get, and at what interest. Also very important is your debt-to-income ratio.
Even beyond that, there are certain other issues that can affect your ability to get a mortgage.
However, the main things are your credit score and your level of debt.
Talk to a good mortgage broker for more guidance.