Should I expect the score used for my home financing to be the same as what's reflected on my credit score tracker? We debunk three common misconceptions and help you clean your credit.
Imagine tracking your credit score via mobile app for over a decade to later find the number you thought you had, wasn’t the one that would be used on your home financing application. We’d be bummed too, so we thought it would be a good idea to set the right expectation and help you understand what we can do to help.
We find that about half of our clients expect their credit score to be 100 points higher than it is. It’s not a result of bad data, but rather the wrong understanding of how that data will be used for your home financing application.
What we learned is that there are three common misconceptions about credit scores.
Three Credit Score Misconceptions
- All Scales Are Created Equal
- My Score is Forever Unchanging
- Pulling My Credit Will Hurt My Credit
Misconception #1: All Scales Are Created Equal
A credit score is a number that represents your creditworthiness, or likelihood to pay back your debts. It is a misnomer to think that a 720 FICO Score is the same as a 720-credit check from a credit application. It isn’t that one is inaccurate, but rather that each credit bureau uses different scales to determine your credit standing.
Because each credit bureau has its own model of scoring, all numbers are not treated the same. For example, many apps you may use to check your credit may be using a 300-950 scale while your FICO Score, on a 300-850 scale will be used to finance your home. Depending on the scoring model used by your score tracker, the numerical value may vary.
Although the numerical figure may change, note that the value is not. Mortgage lenders use a FICO score to determine your creditworthiness. Therefore, that 100-point drop in our initial example can be the result of conversion rather than a change in the level of your credit strength. Thus, your score is not necessarily decreasing but rather being evaluated in the correct language or scale used for mortgage applications.
If you’d like to check your score and additionally see how it could be affected if you were to make a change, we found a great credit score simulator at by Credit Karma, if you’d like to give it a try for free here.
Misconception #2: My Score is Forever Unchanging
We all know there are small improvements that can be made to improve credit score. Although we recommend paying off debt, increasing your credit limit, keeping a long-standing history of credit, and making payments on time, there are many other actions you can take during the home loan application process to strengthen your credit standing.
Often, you’ll apply for home financing, get your credit score, and then when you receive your disclosures you find that an old credit card hasn’t been paid off, two cars are listed as being leased but you only have one, or a shared credit card that your spouse missed payments for, brought down your score. Any circumstances such as these which reflect old data, unnecessary penalties, or even errors, we are easily equipped to fix.
Many assume that the credit they have now will remain unchangeable while applying for a home loan, but this isn’t the case. We are dedicated to working with you to resolve these issues so that your credit is as squeaky-clean as possible before you your loan is funded.
By correcting your credit history with a deep cleaning before submitting your application, we save you time, money, and energy fretting over the “unexpected” problem that your rate was higher because of a faulty credit score. Note, most lenders do not even consider this when approving you for a home loan. That’s what stands us apart; we’re in it for the overall, comprehensive and seamless experience.
Misconception #3: Pulling My Credit Will Hurt My Credit
Although any credit pull can affect your credit, it hardly impacts your FICO Score at all (remember this is the data that will help approve you for home financing). Even though credit pulls will remain on your credit report for two years, FICO only considers inquiries within the last 12 months. Additionally, FICO Scores typically consider the difference between new credit accounts and shopping for a loan or new account, so unless you’re going to shop around at every single lender, you should be just fine.
The Truth About Your Credit Score
If you compare your free online credit score to your FICO Score, you’re going to feel severely misled. When you recognize the scale of each is quite different, you’ll see that the only change that has occurred in conversion was a translation for your loan application.
To prepare your credit to be pulled, you can work with a home loan advocate to scrub your credit from old transactions or debts that have been falsely documented or have already been paid off. Lastly, you can search for the right lender that will help you experience the cleanest experience without worrying that every credit pull will ruin your chances to shop around and find the best of the best.
We don’t believe in sitting back and watching your credit score decrease without doing anything about it. We’re proactive home loan advocates – here to advocate for your experience of a fair, simple, and transparent home financing experience. That’s why we’re going to set any confusion around your credit score and help you understand what you can do about it.
We hope our transparent explanation of credit score misconceptions have helped you see the difference between the credit score you see on a credit tracker versus your mortgage application.