Free Credit Report Scores Can Be Misleading

While it's no surprise that credit scores can vary from report to report, the shock can come when it directly affects you. A little research can go a long way. It can also make the difference in getting the mortgage rate you want and the one you get stuck with. When seeking out a credit score for a home mortgage, equip yourself with some facts. Consider these points as you start out.

When you get a free credit score, it is usually only one bureau

Free is good. Everybody loves free. But in the case of getting your credit score, free is also incomplete. If the provider of this free score only uses one report, you are seeing a very incomplete picture. Mortgage applications require three scores, so the other two scores could be very different. If these overlooked scores are not as good (or worse, contain negative information) you could be stuck with a rate that negatively impacts you -- and your wallet. 

From our various locations in New Jersey -- where we service clients in the high stakes New Jersey and New York mortgage markets -- every single point helps.

So do your due diligence and prepare yourself accordingly.

Caution! It's not the same

Not only is the online free credit score incomplete, the quality of the score is also lacking.

Vic Melillo, Credit Master at Universal Credit Services, warns that the free score you're getting online isn't the same as what lenders use.

"Online scores versus mortgage lender scores can be very different," Melillo said. "Scores obtained by a consumer online can vary 60-100 points from mortgage lender accessed scores. Typically, online scores are general consumer scores and not the scores used by mortgage lenders."

Melillo goes on to explain that there are many versions of the FICO score models, and there is even a model to compete with FICO called the Vantage Score. Mortgage lenders obtain and use an investor-approved version of the FICO scoring model. 

With the different names, configurations and methods, Melillo says it reinforces rule #1:

"When seeking your true credit score number for obtaining a home mortgage," Melillo says, "Speak with a mortgage professional."

New Jersey and New York Mortgage markets

In the states of New Jersey and New York, real estate can be some of the priciest in the country. With home prices climbing higher and higher, it's important to do all you can to save where you can. Not accessing the proper credit scores can mean wasted money down the road.

So be on guard for changes to your score. A common question we hear is: "Can an inquiry (record of a credit pull) ruin my score?" No single inquiry/credit pull ever ruins a credit score. Credit scores change when information on your credit profile changes. If an inquiry/credit pull impacts a score, it is very minimal -- possibly 2-5 points. The reason individuals believe an inquiry has hurt their score is due mostly to one of the following:

1). Something has changed from the first credit pull to the second credit pull, such as a new negative account or an increase in a credit card balance. 

2). The first credit pull was from an online source and not from a mortgage lender. Therefore, the online scoring model varied from the lender-accessed scoring model.

The bottom line

The only way to be truly sure about your credit score is to do it the right way: get a mortgage lender to run an accurate score for you. This method is the surest way to equip yourself to get the best information. It's also the first best step toward your next home. 

Contact NJ Lenders today to get your credit score and plan for your next home. Call 800-908-0005 to learn your true credit score today.