Do Mortgage Lenders Check All of Your Credit Reports?
The credit score is one of the most important factors when getting approved for a mortgage application in Utah. Technically, you have three credit scores, each generated by a major credit bureau calculated using the credit scoring model it likes to use.
Yes, Experian, Equifax, and TransUnion come up with their version of your credit report and score. Having more than one may complicate things, but mortgage lenders have a way to consolidate them to determine your creditworthiness more accurately.
If you are planning to buy a house from one of the new home developments in St. George, Utah, or any other community, it is essential how mortgage lenders figure out your credit score, so you can make sound financial decisions to increase it over time. To shed light on it, let answer the following key questions:
What Is a Tri-Merge Credit Report?
A tri-merge credit report refers to the document that combines all of your credit reports from Experian, Equifax, and TransUnion. Also called the Residential Mortgage Credit Report, it can provide lenders offering home loans with a bigger picture of your credit data to assess your risk as a borrower.
Generally, a tri-merge credit report shows all of your current and past accounts that date back several years. Moreover, it depicts your total credit usage as well as all your inquiries, delinquencies, and public records, including debt settlements and bankruptcies.
Considering that one credit report affects the others, it is imperative to monitor all of them accurately. This goal is trickier to obtain than you might think. Each credit bureau does not score consumer creditworthiness the same way. Instead of getting the average of all three, mortgage lenders typically use the mid-score to see which loans and interest rates you qualify for.
What Is a FICO Score?
Do not confuse a FICO score with credit scores from Experian, Equifax, and TransUnion. Shorthand for Fair Isaac Corporation, FICO introduced the first credit score to be used for general purposes in 1989. The company’s credit scoring model has been used by lenders to assess consumer risk in the United States ever since.
FICO scores have different versions, and the major credit bureaus do not use the same one. Experian prefers the FICO Score 2, Equifax likes the FICO Score 5, and TransUnion has more faith in FICO Score 4. While the credit scoring models they used are just different versions of the FICO score, they may have a particular name for their credit score, which can make things a bit more confusing.
What Is VantageScore?
VantageScore is the credit scoring model developed through the combined effort of all three major credit bureaus. Although Experian, Equifax, and TransUnion are behind it, mortgage lenders are still not adopting it. It can take time and money to switch from an old model to a new one.
Nevertheless, credit scores with VantageScore promise to benefit more consumers, especially thin-file borrowers who otherwise can’t qualify for traditional loans. Compared to FICO score versions, VantageScore 4.0 uses trended data to provide mortgage lenders a more in-depth look at a borrower’s historical utilization rate data.
In a perfect world, credit scores are calculated identically since they are based on similar credit data sets. In reality, though, they are not. But if you develop good spending and repayment habits months or years ahead of your mortgage application, all of your credit scores should increase naturally with little effort on your part.