I've been in the lending (revolving) business before, so I fully understand scores and bureaus.

But I still thought most lenders use FICO scores. When and why do mortgage lenders use other scores, and if they are significantly different than FICOs, how and why?

Does it make a difference if it is a HELOC or 1st mortgage which type of score is used?

If a consumer is supposed to keep track of his FICO so he knows when it is time to apply for a loan, but then the lender gets a different score which is 40 points lower than his FICO, what can this consumer do? Try to find a lender that uses FICOs?
Thanks!
--A

FICO is a term loosely used as it is the same as a Beacon or Emperica.

FICO: Fair Isaac Credit Organization, used by Experian.

Beacon: Same as FICO, used by Equifax.

Emperica: Same as FICO and Beacon, used by Trans Union.

Typically a lender will use the middle score of the 3. In essence, all 3 scores are FICO's.

I know that...
But I recently had a client pull his score online and see a 675 high score. But the lender said no, your highest was 637.
I was wondering if there was a different type of score. Actually, it says on the report that they are FICO scores from Beacon or Classic but how can the score that the consumer sees and the score that the lender pulls be so vastly different?
Has something changed recently?
Otherwise how can consumers educate themselves and prepare to obtain good rates from lenders?
--A

We pull fannie or trans vista reports which tend to be more in depth than that of which the consumer obtains through someone like freecreditreport.com. We pull hard scores where as that would be more or less considered a soft score.

"how can consumers educate themselves and prepare to obtain good rates from lenders?" by UpscaleLV


Pay bills on time and keep credit balances low, be sure you have at least 3 open trade lines. It is that simple.

follow up on what AZ said about the scores being different. When a customer pulls a score from my fico.com or similar web sites that score is typically higher than what lenders use. The isssue that lenders run into is that we have to try and explain this to borrowers who shoudld automatically question this. These sites do not do a good job of informing the customer of the difference.

""""how can consumers educate themselves and prepare to obtain good rates from lenders?" by UpscaleLV


Pay bills on time and keep credit balances low, be sure you have at least 3 open trade lines. It is that simple.

"""

No it's not.
Let's say you are pulling yourself out of tough times, cleaning up your credit. You've got a year of steady payments on the books. Is it time yet to buy a home or refinance your loan? Should you really have to sacrifice a creditor inquiry to find out? You should be able to see if your creditors have reported your efforts, and you should be able to see if all your factors - time on bureau, amount of indebtedness, payment history, status of medical collections, whatever is going on in YOUR scenario - are adding up to give you a decent score.
Or let's say you are just starting out with your credit. Whatever the case is.
When you see that you are now within a competitive range, you should be able to assume it's time to get the loan, and you shouldn't have such a huge discrepancy of 40 or more points difference. That is huge.
--A

Hey, I agree with what you are saying. There shouldn't be a difference between what you as a consumer are able to see and what we are provided. Unfortunately the CRA's will never let any of us see the algorythms they use in their scoring modules. This is something that should be addessed by federal legislators.

I don't make the rules. Don't kill the messenger. I can only show you how to build and maintain your score.

If you would like you can call me and I will be more than happy go over your report with you and I will show you exactly where your problem areas lie and how to fix them.

It's not my report. As I was saying, I know the lending side of this. I've never noticed such a discrepancy in scores before. I know how to build good credit and how to advise people on credit. It's the score discrepancy that I thought there might be an answer too.
--A

http://www.heraldnet.com/stories/05/03/24/100bus_singletary001.cfm

above is a link to a great story about the differences in the scores. You can also click the link below and it will take you to several different articles


http://www.ask.com/web?q=why+is+my+credit+score+different+than+the+one+my+lender+pulled&qsrc=0&o=0

Great information. Thank you TN!

Aha!! Thanks for the links. Good info.
--A

I have been helping clients rapidly improve and restore credit for 12 years. In that time, I can say, myfico.com has always been the most accurate compared to what I pull when running a loan for a client. I do not know why, but, I have had clients use truecredit.com and other sites, and have had them pull scores anywhere from 10 to 80 points lower, or, higher than what I pulled. Scores are easy to manipulate if you know the rules. Read and experiment with what you have learned. Pay on time and keep balances at 25% of the limits.... you'll see results...

Residential Mortgage Credit Reports (What we pull) uses a scorecard tailored to our industry.

Same for the auto industry.. Their reports are tailored to their industry and take auto liabilities into more consideration.

Consumer reports should be close to what a credit card company pulls.

Some good tips would be:

1) Stay under 30% of revolving credit limits.
2) Opt Out from credit bureau solicitation. www.optoutprescreen.com When a report is pulled the bureau may sell your information. Just basic info but it is the main reason you get credit card offers in the mail.
3) Close out old revolving accounts. Sending the final payment does not close the account. Sometimes verbally telling them too does not either. YOu must send a letter in writing stating you want to close the account and it needs to be signed by all obligated signers on the account. (so ex's too if you had a joint account with an ex!)
4) Consumer inquiries do not affect your score but all other inquiries will. It varies on each score card as to when it hurts. I do not know how many. I really do not know if 2 score cards are the same or not the same... But I have seen 2 inquiries show that inquiries lowered the score when given reasons on a report that was a >720.

Let's add some more info that everyone see's hurt things.

What Gregg says is correct. Scoring is designed to rate the borrowers risk factor. The scoring modules are different for mortgage loans, installment loans and consumer credit. A borrower who is rated as a certain risk for a mortgage loan may be more or less of a risk for a installment or consumer loan.

As another poster stated, scores can be manipulated but the simple approach is really the best. Use credit responsibly, view credit obligations as just that - an obligation and check your report twice a year for accuracy. Do these things and you won't have to worry about your credit scores.

Hi, I'm new to this but by being so desperate to own my first home I have been forced to try and understand about how credit works in the home loan process. The fact is my husband and I have several small collections items (less than 200.00) on our credit that we are just now chipping away at each month. Up until 2 weeks ago we had no credit cards, I just applied. I'm a teacher and he's a comm. underwriter at Nationwide. We make decent money but we have no credit and can't qualify for a mortgage. All I hear is pay your bills on time which we do but those household bills and car payments aren't reported to the bureaus. Our credit hasn't changed in years. I hope the credit card helps but what else could we do? We want to buy a house in 6 months. Our scores are roughly around 540ish. We want them to be at 620< before we apply for a loan. Is this possible in a short period of time? I really want to see our scores increase...

Herre's something that I had posted before but hopefully it'll help you out on your planning. This is basically the model of the FICO score:

35% of the score is based on PAYMENT HISTORY
How recent- this the most important
How late the payment is. Negative weight is given (in this order:
30, 60 and 90 day lates)

30% of the score is based on BALANCES OF CREDIT
These are heavily weighted on revolving cards
If you have more than 50% of your limit, there is a hit
If you have more than 75% of your limit, there is a harder hit.
You earn more with smaller balances than with a zero balance

15% is based on your CREDIT HISTORY
The older the trade line, the positive weight
Ideally, they are looking for 3 – 5 trade lines
Ideally, 30 years is the perfect length of time to have a credit card
They divide the number of cards by the length of time
(Every time you open a card, it drops your score)

10% is based on the TYPE OF CREDIT
They are counting the number of trade lines in each category
A mix is best
They are keeping track of all accounts: open, closed & frequency
Installments through finance companies can hurt your credit
(This is something you have in common with late payers)

10% is based on the NUMBER OF INQUIRIES
There are parameters: it only goes back 12 months
Negative weight is given to: what kind, how often
The weaker your credit ability, the more negative impact per pull
Pulls of the same category count as one for 30 days.

Hope that Helps,