The question that comes up most frequently when I pre-qualify prospective homebuyers is “Why is my mortgage credit score so much lower than what Credit Karma shows?” It’s a very legitimate question and very frustrating to the client who has worked hard to increase their credit score before applying for a mortgage.
The credit score you see when using services like Credit Karma are Consumer Credit Scores. Consumer credit scores use a different scoring model than mortgage credit scores; they are meant to be educational. Consumer credit scores give a broad understanding of how good your credit is and help track changes in your credit worthiness. It’s not surprising to see differences of 20 points between a mortgage credit score and a consumer credit score.
Mortgage Lenders use a different scoring model. Mortgage Credit Scores uses the FICO scoring model. This model pulls information from all three credit bureaus – TransUnion, Equifax, and Experian, so your mortgage credit report will show three scores. Lenders use the middle score when they qualify as well as determine their interest rate.
Credit scores can range from 300-850, but the minimum credit score required for a client to obtain a mortgage is 580. Payment history plays the largest role in both mortgage and consumer credit scores; it’s important to make all payments on time regardless of whether you are paying a mortgage, an auto loan, or credit cards. I hope this solves some of the mystery around how credit scores are calculated. Improving credit can take as little as two weeks or more than two years, but I’m the rare Lender who is committed to helping you throughout your credit journey to make homeownership a reality! Give me a call!
About the author:
Southeastern Bank – Debbie Hudson
NMLS # 942242
Richmond Hill, GA 31324
Phone: 912-656-3063 cell
Phone: 912-459-2323 office
Fax: 912-459-2340 fax