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Have you or someone you know ever checked your credit score on Credit Karma, called up your Realtor all excited and ready to go out looking for a home, only to find out that the pre-approval wasn’t what you expected? Or come to find out, you have some work to do on your credit score prior to purchasing a home because you did not qualify at all?
Why does Credit Karma increase people’s expectations for home financing only to have those expectations crushed when you’re ready to take the leap and finance a home (or a car)?!
Let me explain why these issues arise so that your expectations will not have to take a nose-dive and we can work together to still make that dream home a reality!
The score that is pulled from myFICO, the credit bureaus, or even sites like Credit Karma or other third-parties in what is called an “educational score.” These scores are provided just to give you a very general perspective on your credit standing. They are simply not the scores that lenders actually use to approve your application.
Creditors and lenders use a more conservative and industry-specific credit score that is customized for the type of credit product you’re applying for, in this case a home. Even when the lender uses FICO scores, the score they see can easily differ from the score you see by several points, sometimes enough to disqualify you from approval. I have personally seen Credit Karma scores fluctuate by up to 80+ points!!! By checking myFICO you’ll see the closest scores to what the lender industry sees when they check your score. The scores you see, however, still may not be the score the lender actually uses when qualifying you for a mortgage approval.
Third party sites such as Credit Karma are only updated quarterly, not monthly, which is what most mortgage companies have access to in their systems. These scores are also pulled differently than what lender’s pull to qualify you for a home loan approval. This difference in credit scores is caused because the scores you see is what is called a personal pull vs. a mortgage pull, which is what the lender sees. The difference in what you see vs what the lender sees is what causes the expectation issues to arise. The educational score is not at all reliable, mainly because it is not updated fast enough to be accurate.
When a mortgage pull happens, depending on the rules and regulations of the loan officer or loan banker that is being used, they will/should pull all 3 reports from all 3 credit bureaus, Equifax, Experian and TransUnion; The loan officer or banker will usually take the lower of of mid-score because with bank loans you must always go with the most conservative numbers. As I am not a mortgage loan professional if you would like more details regarding the mortgage pull process I would recommend consulting with a mortgage professional. I would be happy to discuss this with you myself and refer to you a great one! I am a Realtor and am explaining this process via a mortgage and loan officer that explained this to me after I had a client that was ready to go and was so excited about their score, only to not be qualified, and ended up having to do some credit work to bring the lender score up to what the educational score said the score was on Credit Karma. Don’t let your dreams get dashed though! If you do find yourself in this predicament, keep your chin up! Usually, it takes only a few months to a year to bring a credit score up to qualify for an approval. Just remember, if you are hoping to move into a home soon then the earlier you consult with a professional Realtor, the better! I can navigate you through the mortgage and loan process and connect you with the right loan banker or officer that can pull your credit and explain anything that needs to be worked on or... put that pre-approval in your hand right away! If you are in the San Antonio or surrounding areas go ahead and give me a call, I would love to make your dream home a reality! 210.502.4242
Carly Slatton, Vortex Realty
210.502.4242