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What Credit Report Does Home Loan Use

Seeing Your Credit Score


To get an idea of what your credit score looks like, you can try free online services like to see your credit report from one or two of the bureaus and generate an estimated score based on the VantageScore model. To get an estimate of your FICO score instead, check with your bank or credit card company since some offer this benefit to members. For example, Discover and American Express cardholders can get free FICO scores along with customers of Bank of America, Chase and Ally Bank. However, do know that these online scores are estimates and will likely differ from what your lender calculates.

What If My Credit Scores Are Different

Your FICO score will fluctuate, but to what extent will depend on what information your report shows.

The credit score calculation algorithm remains the same, but the specific details that get factored in could weigh differently between bureaus. For example, you could have a much lower FICO score calculation at one of the bureaus if they mistakenly left your oldest account unreported.

You need to know approximately what your credit score is at any given point in time. If you want to be more precise, you can request your credit score from all the credit-reporting agencies. This way, you can determine the lowest and highest score that a lender could see when pulling your credit report.

If you want to keep up with your credit scores all across the board, its a good idea to request it at least once every four months. You would need to get your rating from all of the bureaus every time, though. This is because the score can fluctuate a lot depending on many variables, and watching like a hawk would mean you can see what causes particular score fluctuations.

How Your Credit Scores Are Made And Why They Matter

Since there are few numbers that matter as much to your financial well-being as your credit score, it helps to know what your scores mean and how they work.

First, know that theres a big difference between a credit report and a credit score.

  • Your credit report is a record of your borrowing history Each loan or line of credit youve opened, dates on those accounts, payment history , and so on. Overall, it shows how reliably you manage and pay back your debts
  • Your credit score sums up your credit report in a single number It weighs every item on your credit report to come up with an overall score that sums up how responsible of a borrower you are

The big three credit bureaus Equifax, Transunion, and Experian operate in the realm of credit reporting.

Each one keeps a separate record of your borrowing history, based on the information your creditors send them.

The other players in the game FICO and VantageScore are responsible for credit scoring. They determine your score based on whats included in those credit reports.

For example, keeping your credit utilization ratio low can help your credit scores, while repeatedly neglecting to pay your credit card bills on time can hurt them.

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What Is The Difference In Credit Scores

While the fundamentals behind consumer credit scoring models are similar, each credit scoring model uses specific criteria to analyze one of your credit reports and generate a credit score.

Sometimes there are small, but potentially important, differences. For example, one credit scoring model might ignore paid collections accounts while another might consider a collections account a negative item even if it’s been paid.

FICO® and VantageScore are the two market leaders in credit scoring, and the base scoring models they create also share some similarities.

Each model only looks at the information in one of your credit reports from Experian, Equifax or TransUnion to determine your score. A higher score is best because it indicates you are less likely to miss a loan payment.

The latest base models also have the same scoring range: 300 to 850. However, FICO® also has industry-specific scores, including scores for auto lenders, that range from 250 to 900.

Lenders Want To Minimize Default

What Credit Score Do I Need for a Home Loan?

Aside from the Big Brothers watching the lenders, no bank wants to put themselves at risk for default. If you were to increase your debt load, it depletes your monthly resources. You might get in over your head, so to speak. What looks okay on paper might be more difficult to afford than you originally thought. After a few months of balancing the new mortgage payment along with your other monthly debts, you might find it too difficult to own a home. Because you just purchased it, your equity might not be very high, depending on how much money you put down. This could put you at great risk for letting the home go into foreclosure. This is what lenders try to minimize by pulling your credit again at the last minute.

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Whats The Difference Between A Fico And A Credit Score

Its important to differentiate FICO® Scores from other credit scores because FICO® Scores are created by the Fair Isaac Corporation and are evaluated by over 90% of top lenders when issuing loans.

Though there are other types of credit scores, FICO® is used as an industry standard for determining creditworthiness. Some credit scores are calculated differently from FICO® and are not as accurate.

Bottom line, FICO® is the most commonly used credit score, and therefore the most credible and comparable.

How Is Your Credit Score Determined

The two major scoring models calculate your credit score based on a few factors:

  • Payment history: Your record of on-time or missed payments.
  • Amounts owed and : Your total debts and the percentage of your available credit that youre using.
  • Length of credit history: The age of your credit accounts.
  • : The variety of different types of credit accounts you have.
  • New credit: How many accounts youve opened recently and the number of hard inquiries on your credit report.

Although the major credit scoring models are pretty similar, FICO and VantageScore have several differences. For example, they have different weightings for the above factors, as shown in the tables below.

6% 2%

To gain a solid understanding of how credit scores work, youll need to know how your actions influence each of these categories.

Payment history

Your payment history is the most important factor contributing to your credit score. On-time payments will help you build your credit, but missed payments can seriously hurt it.

For instance, a 30-day late payment can cause your FICO score to drop by 80 points or more in some circumstances. The longer your payment is overdue, the greater the damage. 8

The following negative marks also hurt your credit because they show that youve defaulted on your payments:

  • Bankruptcies

Amounts owed/credit utilization

Length of credit history

New credit

VantageScore uses slightly different categories than FICO

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Improving Your Credit Score

If you pull your credit scores and find you won’t qualify for a mortgage or would probably have to pay a high rate, it’s a good idea to take steps to raise your scores. Your payment history and debt owed make up the biggest part of your score, so paying down large debts, avoiding the temptation to open more credit card accounts and avoiding late payments will help you gain points over time. You’ll also want to make sure your credit reports don’t have mistakes, such as incorrect accounts, and avoid closing your long-standing accounts.

To see how positive changes can improve your score, try using a like those you can find on the Credit Karma, TransUnion, myFICO and other banking websites. You can plug in your current score and do simulations to see how your score changes if you take actions, such as decreasing account balances, getting credit limits increased or avoiding late payments.

Home Equity Line Of Credit Combined With A Mortgage

Credit Score and the loan process | Mortgage Mondays #110

Most major financial institutions offer a home equity line of credit combined with a mortgage under their own brand name. Its also sometimes called a readvanceable mortgage.

It combines a revolving home equity line of credit and a fixed term mortgage.

You usually have no fixed repayment amounts for a home equity line of credit. Your lender will generally only require you to pay interest on the money you use.

The fixed term mortgage will have an amortization period. You have to make regular payments on the mortgage principal and interest based on a schedule.

The credit limit on a home equity line of credit combined with a mortgage can be a maximum of 65% of your homes purchase price or market value. The amount of credit available in the home equity line of credit will go up to that credit limit as you pay down the principal on your mortgage.

The following example is for illustration purposes only. Say youve purchased a home for $400,000 and made an $80,000 down payment. Your mortgage balance owing is $320,000. The credit limit of your home equity line of credit will be fixed at a maximum of 65% of the purchase price or $260,000.

This example assumes a 4% interest rate on your mortgage and a 25-year amortization period. Amounts are based on the end of each year.

Figure 1: Home equity line of credit combined with a mortgage

$260,000 $260,000

Buying a home with a home equity line of credit combined with a mortgage

  • personal loans
  • car loans
  • business loans

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Do All Of The Major Banks Credit Score

All of the major Australian banks use credit scoring to some extent.

Some lenders, such as ANZ and Westpac, rely heavily on credit scoring to make the decisions on their home loan applications.

Whereas CBA, St George and NAB tend to use a combination of scoring and manual credit assessment. They retain some ability to override a decision made by their system, however, they are still reluctant to use it.

As mortgage brokers, we are in a unique position. We know the systems used by the banks and have learnt a great deal about the way that their credit scoring algorithms work.

If you would like our help with your mortgage then please call us on 1300 889 743 or .

Does The Lender Pull Credit On The Day Of Your Closing

January 31, 2017 By JMcHood

You received your mortgage approval, you figure everything is good to go and you are free to do with your finances as you wish, right? Unfortunately, this can hurt you in the end. Lenders have gotten smarter with their ways, especially after the housing crisis. Now, not only do they recommend that you dont open a new credit card, buy a new car, or rack up your current credit card balances before you close, they check to make sure you dont! Many lenders either pull credit a few days preceding the closing or even on that day, depending on when they provide the clear to close. This means they could pull their approval at the last minute if you changed anything regarding your finances.

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Mortgage Lenders Pull All Three Reports But Only Use This One

According to Darrin Q. English, a senior community development loan officer at Quontic Bank, mortgage lenders pull your FICO score from all three bureaus, but they only use one when making their final decision.

“A bank will use all three bureaus,” tells CNBC Select. “It’s called a tri-merge.”

If all three of your scores are the same, then their choice is simple. But what if your scores are different?

“We’ll use that median score as the qualifying credit score,” says English. “Not the highest or lowest.”

If two of the three scores are the same, lenders use that one, regardless of whether it’s higher or lower than the other one.

And if you are applying for a mortgage with another person, such as your spouse or partner, each applicant’s FICO 2, 4 and 5 scores are pulled. The bank identifies the median score for both parties, then uses the lowest of the final two.

What If You Don’t Have A High Enough Credit Score To Buy A House

What kind of credit score do I need to qualify for a ...

Having bad credit or no credit may mean youre unlikely to get a mortgage unless someone you know is willing to help out. Having a co-signer who has a better credit score could help you secure the loan.

Another option would be to have “a friend or more likely a family member purchase the home,” add you to the title and then try to refinance into your name when your credit scores improve sufficiently, according to Ted Rood, a mortgage banker in St. Louis.

If such assistance isnt available to you, your best bet will be waiting and working on your credit.

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Why You Can Trust Bankrate

Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.

Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.

Our mortgage reporters and editors focus on the points consumers care about most the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more so you can feel confident when you make decisions as a homebuyer and a homeowner.

How Credit Scores Work

Your credit score is a three-digit number that represents your risk as a borrower, and its based on the information in your credit report.

The two main credit scoring companies are FICO and VantageScore. They release new scoring models every few years, which is why you have many different credit scores.

In the current versions of both of these models, your score ranges anywhere from the lowest credit score of 300 to the highest credit score of 850, with a higher score being better.

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Can You Get A Mortgage With Bad Credit

A bad credit score for a mortgage is below 620. While its possible to get a mortgage with a low credit score, youll pay higher interest rates and have higher monthly payments.

If your credit score is lower than the minimum required, you might still be able to get the loan if you add a co-signer to the mortgage, use a larger down payment or lower your debt-to-income ratio.

Correct Errors As Soon As Possible

Improve my FICO credit score using a secured credit card to purchase a home

The longer you wait to correct your credit history, the more potential damage errors can do. Prevention is key, so if you don’t use a credit monitoring service, you should consider one. If you do find any errors, send a letter to the bureau that reported it and clarify with them why you think it is incorrect. Be sure to provide proof and any other documentation that will help your claim.

If you’re already in the process of applying for an FHA loan, notify your lender of your dispute with your credit report as well because your credit score indicates your creditworthiness. It never makes sense to suffer at disadvantages that were the result of something you didn’t do.

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When It Comes To Getting A Mortgage There Are Enough Numbers Flying Around To Make Any Mathematician Happy Lenders Will Look At A Number Of Items Which Can Include Your Credit History Your Income And How Much Debt You Have Among Other Things

But one number is perhaps one of the most important numbers of all. Your FICO® scores can impact whether you get a loan or not, and if so, at what interest rate. Thats why its important to understand the nuances of your FICO® scores. Luckily, its not rocket science. Heres the scoop on how your FICO® scores can affect your mortgage.

How To Check Your Fico Credit Score

When determining if an applicant qualifies for a mortgage loan, car loan, or credit card, lenders will use the lowest median credit score of all borrowers on the loan as the qualifying credit score. This means that lenders will look at your three credit scores from each bureau and they will use your middle score.

If youre applying for the loan with a spouse or second person, the lender will choose the lowest median credit score of each of your scores. For example, if your spouses scores are 560, 590, and 610, and your scores are 670, 700, and 710, the qualifying credit score would be 590.

You can use that score or you can choose to be alone on the loan, which would potentially allow you to get a better rate. But if you make that decision, you wouldnt be able to use your spouses income to qualify.

To help you maintain or improve your credit score, Rocket HQSM offers a free credit check on a weekly basis to understand what yours is and how you can improve it.

Rocket HQs scoring simulator generates an accurate score that will show you how different factors like opening a new account or forgetting a payment can affect your scores. This is designed to make you more informed and help you learn about how to build and maintain your credit over time.

Create a Rocket Account today.

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