Many articles have been written about the importance of having good credit. And nowhere is the health of your credit more vital than when you apply for a house loan. For most people, a house is the most pricey thing they will ever buy and the overall health of your credit determines whether or not a loan company will offer you an cost-effective home loan. Since the most typical measure of financial health is a credit score, most prospective buyers are urged by well-meaning sources to “check your credit score before you apply.” Many prospective homebuyers head to the Internet to do just that, and seeing that their score is sufficient, they head off, score in hand, to meet with a lender to talk about prospective loans.
And then the financial institution drops the bomb – “Sorry, but your credit score is too low. You don’t qualify for the best rate of interest.”
What happened? How can the credit score you buy from the credit agencies be higher than the one the financial institution receives? The answer is a straightforward one – there is more than one kind of credit score. Each of the three primary credit agencies – Equifax, Experian and Trans Union, uses a different technique of determining credit scores. While the scale and standards they use are roughly the same, the method is slightly different at each agency, so checking with all three agencies could possibly provide you with three different scores. Or even four – the three bureaus are now also making use of a unified scoring technique. But which one is the “correct” score?
Mortgage lenders nearly always check the FICO score, created by Fair, Isaac, and Co. The FICO score is comparable to many others, but it is the one that lenders are checking. That means that if you want to know exactly where you stand ahead of time, you should check your FICO score yourself. And you need to make sure that the number you get is, in fact, your FICO figure and not several other arbitrary score.
How can you do that? There are many places on the Internet where you can obtain a credit score, but not all of them will offer the FICO figure. Make sure that the website you visit offers the FICO score before you agree to pay. Equifax makes the FICO figure accessible on their website, as does MyFICO.com. If you aren’t certain, you might check with one of those two Websites. Making sure you have an accurate representation of your financial health before applying for a mortgage is a good idea. Just make sure that you’re looking at the same measure of monetary health that your financial institution will use – your FICO score.
