Online Credit Scores Vs. Lender Credit Scores

I’ve never pulled someone’s credit for a mortgage application and heard them say the credit scores I got were higher than what they got online at one of those consumer credit sites like FreeCreditReport or Credit Karma. This is even true for those people who access their scores directly through the credit bureaus Equifax, Experian, and TransUnion.

Online Vs. Reality

The mortgage credit scoring model yields scores on average 40 points lower than online consumer sites.  Other loan and finance applications like car loans and credit cards are also typically lower. This means the scores on the consumer sites are basically worthless and all they do is inspire false confidence.

You may ask how does this benefits anyone? It doesn’t but the consumer credit sites don’t claim they are giving out FICO scores which is what financial institutions use. What they give you are scores based upon their calculations. Even on the rare occasion they are using a FICO based scoring model there are over fifty FICO based scoring algorithms so it’s unlikely to be the one you’ll need in the future when applying for a loan. In my opinion the consumer or free credit report sites are the Zillow of the credit world. It’s fun to see what the numbers look like but it’s not to be taken too seriously. 

What is one to do? The obvious answer is for anyone looking to apply for a home loan be sure you are having your credit pulled by a mortgage professional for specifically a mortgage application. The not so obvious answer is this can also be done for free by clicking here or by calling the number below.

By David Hughson

Broker | Mortgage Planner

david@greenmeansgrow.com

858-863-0264

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The GreenHouse Group, Inc. | Real Estate Consulting & Mortgage Planning. "Moving People With Purpose."

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