When is Your Credit Score Not Actually Your Credit Score?
It’s frustrating no doubt: Scrimping and saving for 6+ months to have that down payment you need to get a lower rate.
Dutifully watching what you assume to be your credit scores flick and flutter throughout the months you are saving. Prospective homebuyers are often confused, chagrined or downright furious when they learn mortgage & auto lenders see a different score than they do.
They should be. How is that fair?
The reality is lending agencies rely on unique scoring formulas weighted for mortgage-related factors. It’s a risk-hedging move designed to help banks better assess whether you’re a good candidate for the financial responsibility of a mortgage.
Bummer, right? It is and business shouldn’t be done this way. It’s one of the myriad of ridiculous absurdities that the credit bureaus are able to get away with. After all, the credit bureaus – Experian, Equifax, TransUnion – have one of the biggest lobby machines in Washington D.C.
Their money lies in obscurity and confusion. Profits lie in credit reports that live constantly in an inaccurate state that requires – wait for it – paid updates and corrections. Credit scores are designed, along with the scoring model, to obfuscate as much money from consumers and lenders as the credit bureaus possibly can.
The consumer-centric score you might purchase are mostly inflated. Sites like CreditKarma will provide you a score that sometimes can be 60-80 points higher than a mortgage credit score.
Even a score bought directly from bureaus will not be accurate.
Thankfully, the good folks at Fair Isaac Corp., the developer of the FICO credit score, recently announced that they are now selling consumers a look at a version of their FICO score that had been mostly unavailable to them
You can monitor your real credit report and FICO score for the nominal monthly subscription fee of $24.95 per month. Seriously?
Fair Isaac says its recent FICO updates are moves to give scores to more consumers.
“Over the past few years, a growing number of websites have been selling or offering free other credit scores, which are used only or mostly for educational purposes. – (read those credit sites are taking our racket). FICO research shows that many consumers think they’re checking their FICO score, but they’re not, and the educational score they’ve seen isn’t being used by lenders,” says Jim Wehmann, executive vice president for scores at FICO.
This is about “helping to clear up consumer confusion around education scores and scores used by lenders,” he says.
Riiiight Jim. Riiight.
It’s a broken system and a grade A racket, but those scores are important and you most definitely need to be checking them BEFORE you buy a home.
Ignore my sarcasm and check out your scores early in the process.
Bite your lip and break out the plastic – your FICO score awaits.