Dallas Fort Worth Area Homes and Real Estate

Many buyers in the early stages of either looking for a home or researching their mortgage options often choose to obtain their credit report and credit scores from one of the various "free" credit report offers available online.   I've noticed this trend over the last few years with new clients.  Many of them already have their credit report and credit scores before they ever speak with a lender or Realtor. 

I say "free" because these services typically require enrollment in a membership which must be cancelled or they will be charged a monthly fee.  The monthly service fee typically includes a service or services that can be useful, such as regular updates of their credit report, identity theft protection or credit monitoring.  Credit monitoring is a service that notifies consumers via email whenever new activity occurs on their credit report, which can help detect fraud and errors quickly before they become a serious problem. 

So despite the fact that some of these "free" credit report offers may be marketed in a somewhat misleading manner, the services they provide with the monthly membership can certainly be helpful to consumers, especially those getting ready to purchase a home and want to keep a handle on what's happening on their credit report. 

In addition to these services, the membership usually provides consumers with instant access to both their credit report and credit scores, which is often the main motivation for signing up for the service in the first place. 

Which brings me to my main point - THE CREDIT SCORES THAT MANY OF THESE SERVICES PROVIDE ARE NOT THE SAME CREDIT SCORES THAT LENDERS USE TO QUALIFY BORROWERS. 

In other words, the credit score they see on their "free" credit report is often not the same score a mortgage lender sees on the report they obtain from the three credit bureaus.  Mortgage lenders must pull their own report; they cannot use a copy of a consumer report from a "free" credit report service to issue a formal loan approval. 

Anyone can create a mathematical model or algorithm and market it as a "free" credit score.   But the "official" credit score that mortgage lenders use is called a FICO® Score.  Mortgage lenders usually qualify borrowers based on the median FICO® score acquired from the three credit repositories: Equifax, Experian and Trans Union.  

And yes, it gets a little more confusing.  Each credit repository has slightly different versions of the FICO® Scoring model and each bureau can have different info on a single consumer that causes the scores to vary from one repository to the next. 

How to sift through all of the confusion and find out where you stand?  If you're in the market for a mortgage, the easiest way is to simply contact a lender and get pre-qualified.  Most mortgage lenders will provide borrowers with a copy of their credit report either at their cost (which is usually less than $20) or for free.   

There are some credit report offers on the internet that do provide a FICO® Score, but usually only from one credit bureau.  To obtain all three without going through enormous hassle, it's usually easiest to just talk to a lender. 

But won't credit inquiries destroy your credit score?  Not at all.  That's one of the biggest myths I hear from consumers and even some mortgage lenders as well.  The truth is that special rules apply to mortgage credit inquiries.  In fact, according to MyFico.com, it's OK to have your credit pulled by multiple mortgage lenders as long as the inquiries occur within a certain period of time. 

So if you're in the market to purchase a home, it pays to have a mortgage lender obtain your credit report as quickly as possible.  Credit monitoring can certainly provide consumers with a good way to quickly identify any activity that might potentially affect a loan approval or their ability to qualify for the best interest rates.

And to obtain a copy of your credit report completely free, visit www.annualcreditreport.com