Credit Monitoring Services
These days credit monitoring services are very popular. Your credit rating is an important part of life. It can have a major impact on whether you save money or end up having to pay more than you’d like to on different types of loans.
So that you can make sure you’re in the loop when it comes to credit monitoring, let’s go over some things that are helpful to know.
You may have heard the term “FICO score,” but do you know where the score comes from?
The company behind FICO scores is Fair Isaac Corporation (FICO), which created the algorithm that uses multiple factors to determine your score. This score predicts your ability to repay debts.
There are three kinds of FICO scores, including:
- Credit card
Scores between these three types vary a little bit. Consider that a credit card may have a $5,000 limit, an auto loan may have a $35,000 limit, and a mortgage may be for $250,000. As the risk and monetary value of each loan type goes up, FICO makes minor adjustments to the algorithm based on the type of credit you are applying for.
The 3 Major Credit Reporting Agencies
There are three major credit reporting agencies in the US, including:
In my years doing mortgages, I’ve found that TransUnion is the credit reporting agency that is most representative of the average credit score across our country.
Keep in mind, though, that these agencies have recently been fined by the Consumer Financial Protection Bureau (CFPB) for providing misleading information to customers about the use of their services. You may not always get what you think you’re paying for.
You may have heard of a “soft” or “hard” credit pull, or a “single” or “tri-merge” credit report.
Know that there is no such thing as a “soft pull” on your credit. If someone accesses your credit report, it is going to be a single report from one of the three above-mentioned agencies with your credit information (Equifax, Experian, or TransUnion).
A tri-merge report, on the other hand, is when someone looks at all three credit reporting agencies to get an idea of what your average score is.
If you’re not sure if you want to commit to a certain lender, ask that lender to please pull your TransUnion credit. If they ask you why you want that specific bureau pulled, you’ll know that they’re not VA specialists—if they were, they’d know that TransUnion is the agency that shows the average for veterans we work with.
Now that we’ve got the foundation laid, we can talk about credit monitoring.
Credit Karma and Credit Sesame are two credit monitoring services that use slightly different algorithms than the FICO patented algorithm. Both are free services and will give you an estimate that is close to what your FICO score is.
So if your Credit Karma score is 800, your FICO score that the lender sees on a mortgage application could be in the 760 range. The scores won’t always be 100% identical.
In some cases, this won’t make a big difference. However, if your Credit Karma score is a 640 and your actual FICO score comes in at 600, this is quite a big difference—this takes you from being eligible to buy a house to being ineligible to buy a house.
The Low VA Rates Difference
We know that the veterans we work with have worked hard to save a down payment for their home. This is why we look at the TransUnion score when we first look at your information and look at the all three credit reporting agencies when we’re making our initial pre-qualification determination.
So by working with us here at Low VA Rates, you’ll be able to be confident when making an offer on your dream home that you’ll actually get approved for the mortgage down the road.
If you have questions on how your credit score might impact your ability to get a mortgage or would like to start the pre-approval process today, give us a call at 866-569-8272.