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Credit Facts | Pulling your Credit Reports

Like many things in our world today, if you're looking to borrow money for a variety of purposes, the lender or creditor is going to want to evaluate their risk and adjust the interest rate they charge based upon your worthiness. In the lender world, the higher the risk the loan will not be repaid, the higher the interest rate. The lesser the risk, the lower the interest rate. It's even gotten to the point where phone and utility companies evaluate credit scores when someone desires to establish an account or request financing purchases.

Purchasing a home with any type of financing is no different. If you've ever pulled your own credit score, it's likely you got them from your credit card statement, or a private company such as Credit Karma. Unfortunately, these scores are not necessarily the same ones utilized when applying and qualifying for a residential home mortgage, because they don't always tell the whole story on your credit position.

Did you know that there are different types of credit scoring models throughout our financial systems. The basic difference between the term credit score and FICO credit score is in their nature. A credit score in general is a term for assessing the credit worthiness of a borrower by a lender and credit bureaus. FICO, which stands for Fair Isaac Corporation is a brand name for their credit scoring model. Generally, Credit Bureaus use it for rating and scoring a borrower's credit standing.

When you apply for a mortgage, the lender needs to check your credit getting a very comprehensive picture of your financial health, before deciding whether to approve and lend you the money for a loan. In the U.S, there are three primary major consumer credit-reporting bureaus that collect and report credit: Equifax, Experian and TransUnion.

Rather than pulling separate reports from the big three consumer credit bureaus, a mortgage lender can obtain a single residential mortgage credit report that combines these reports into one. Unfortunately, not all lenders and other consumer creditors report to each of the three big credit bureaus resulting in each bureau having different information on you. To solve this problem, the lender can obtain a special combined credit report that has multiple reports into one, providing a more-comprehensive picture of your credit history.

There are two types of compiled credit reports a mortgage lender might pull to evaluate your credit standing. There's a so-called "tri-merge" report: a single, easy-to-read report that compiles from each of the individual reports from Equifax, Experian and TransUnion. And then there's a different residential mortgage credit report, which compiles at least two reports from the three bureaus and typically offers additional information to help a lender review and assess a borrower's credit history and risk.

Regardless of where your lender pulls your credit report, the fact remains that in most cases the higher your credit score, the lower the interest rate you'll pay for your loan. So, I can't stress enough how important it is to personally pull, review and assess your credit reports for each of the big three reporting agencies "before" you apply for a mortgage. It's incredibly common that one or all of your reports will contain mistakes, errors, reporting, addresses and even accounts that aren't yours or have been paid and previously satisfied. It's relatively easy to correct and fix errors on your reports. Also, if there are old accounts, collections, or past due bill that you're in a position to address, now is the time to do it. It could make the difference between you getting approved or denied for a loan. Or, the difference of hundreds of dollars a month in payment because of a higher interest rate charged due to a lower credit score. 

How to Pull "Free" Credit Reports Annually from the Big Three Reporting Agencies

Did you know that under federal law, each of the big three credit reporting agencies are required to provide you with a free copy of your credit report? Below find easy step-by-step instructions on how to obtain your credit reports from Equifax, Experian and TransUnion.

To get your free reports from each bureau, follow these steps: 

1. Go to AnnualCreditReport.com
2. Click on "Request your free credit reports."
3. Fill out one form to request up to three copies of your credit report. 
4. Choose which reports you want (Experian, Equifax and/or TransUnion.
5. Answer questions to verify you're the correct person to be assessing your report, then submit your request (you'll need to do this step for each credit report).

Or, you can go to each bureau directly:

Equifax - www.equifax.com
Get a Free Credit Report | Equifax®

You may already know that there are multiple ways you can get a free credit report. You can get free Equifax credit reports at annualcreditreport.com.1 You can also receive free Equifax credit reports with a myEquifax account. Just look for "Equifax Credit Report" on your myEquifax dashboard.

Experian - www.experian.com

-90% of top lenders use FICO® Scores
- Monitoring of your Experian Credit Report and Score with alerts
- Instantly increase your credit scores with Experian Boost®
*Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more. Results will vary. Not all payments are boost-eligible. Some users may not receive an improved score or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost®. 


TransUnion - www.transunion.com

Know your score. Protect your credit.

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