Mortgage Application: Pulling Credit Report

27Feb2012
Author:
Scott Sheldon
Contact Scott
Mortgage Application: Pulling Credit Report

Taking out of home loan? This might surprise you, pulling credit associated with the mortgage application does not make your credit score drop. This is information circulating around the media, not totally accurate.

When you are filling out a mortgage application with a prospective mortgage broker or lender, they are required to pull a copy of your credit report determine your credit score eligibility for financing. The information circulating around mortgage financing is this “I don’t want you to pull copy of my credit report because it will make my credit score go down.”

This is is inaccurate because it’s not the full picture. Filling out a mortgage application with mortgage broker or lender, requires them to pull a copy of your credit report. This credit report is called a Tri-merge. It’s an accurate representation from Trans- Union, Equifax, & Experian of what your credit score is, 30 days ago. It’s a rolling average of the last month of credit activity with regard to various open lines of credit including previous debts.Think about for a second. The mortgage industry despite the challenges it had over the last couple of years, is still a very profitable for the federal government. Why would they penalize you for creating an investment opportunity for them that they are going to benefit from for the next 30 years (assuming a 30 year fixed rate mortgage)? It just doesn’t make sense.

The credit reporting agencies analyze at the intent of why your credit is being pulled. If your credit is being pulled for a mortgage application, they encourage that. Its true the federal government wants you to shop for your home loan to make the most informed choice as a consumer. As a result, your credit scores so long as you are only pulling credit associated with mortgage applications, will not reduce your credit score.

Your credit score can and will drop when you are shopping for multiple different types of credit. This means when you are shopping for an auto loan, filling out a mortgage application, applying for a cell phone, setting up the utility etc. These different forms of credit shopping taking place at the same time will reduce your credit score.

What happens when your credit report is different from one mortgage application to another.

Unfortunately, this happens. The credit reporting system is not perfect, but generally your credit score will not drop when shopping home loans as long as your shopping home loans within a 30 day window. Sometimes they can also differ from one mortgage company to another.

Let’s say for example that you fill out a mortgage application with ABC mortgage company and they give you credit scores of 680, 700, and 695. Your middle credit score is what the lender will use, 695. Shopping as informed consumer, you also apply with Best Rates mortgage company, the credit scores that they come up with are 682, 701 and 710. They’re mid score for you is 701.

So Why the disparity?

It’s because when a mortgage lender pulls your mortgage application credit report at any given point in time, your creditors on your credit report could be reporting at different days of the month. Meaning that if you have 3 to 4 credit cards for example, in each one reports to the credit bureaus at different days of the month that could affect your credit scores. So there is no real way to control what your credit score will be from lender to lender. All you can do is apply for the mortgage get your credit scores, and if you plan to do shopping, hope that the credit scores don’t deviate from each other. The actual act of pulling the credit reports is not what triggers credit scores to be higher or lower.

To minimize when creditors report to the credit bureaus, pick one or two lenders that you feel offer competitive, nation a rate and cost and pick one. To truly do effective mortgage shopping, you need to have a credit report pulled mortgage lender otherwise you’re only looking at good rates, which are not necessarily rates that the lender could deliver upon.

If there is a significant disparity between their credit reports, consider working with the lender whose credit report is better so long as their rates and fees being offered are competitive. Now you know about credit scores when requesting a mortgage application.

 

 

 

 

 

 

 

 

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