When you apply to purchase or refinance a home the mortgage company is required to pull a copy of your credit report in order to issue a credit decision. Here are things you need to be aware of as it relates to your credit report and credit score from a financial services provider…
The reality is that not all credit reports are the same. A mortgage credit report often called a tri-merge credit report is a blend of all three bureaus and is single-handedly the number one most correct credit report available. It is more correct than anything that you might see hear or read from a credit reporting service, an auto loan company, or from a credit card company. A mortgage is the number one highest form of credit account you can get. It also has the biggest driver of upward momentum in your credit score by making your payments on time. As a result, most consumers are led to believe that when you apply for a mortgage and the mortgage company runs your credit score it automatically makes your credit score go down. That’s simply not the case, here is why.
The federal government wants you to shop for a mortgage. As a result, you have a 45-day window to apply with multiple mortgage companies. They can run your credit score multiple times within that 45-day time frame and there will be no adverse effect on your credit score.
Here’s where things get murky. The credit reporting services providers inform you that pulling your credit automatically drops your credit score. Most of these companies are extremely clever and brilliant marketers. You must remember these are for-profit companies. Their whole entire business revenue model is to keep and retain as many customers as possible. This marketing leads consumers to believe they are the naysayer about your credit reporting. Such companies do not supply mortgages they provide credit reporting which is quite different.
So, if you’re using one of these credit reporting services free or not and you’re using that as the benchmark between what you think your credit score is and what the mortgage company says your credit score is there is an automatic discrepancy. The credit report that you get from the mortgage company is the correct credit report to use and that should be the benchmark. Mortgage companies don’t have anything to gain by making your credit score go down. You have everything to gain by evaluating where you are financial as it relates to borrowing money in the form of a mortgage to buy or refinance a home. One of those elements that must be met is allowing the mortgage company to run a copy of your credit report.
If you’re thinking about trying to apply for a mortgage or want to understand where you are financial as it relates to refinancing or buying a home start today by getting a quick and easy no-cost loan quote!