Credit Scores Are Confusing

Alot of people think they know their credit scores because they get a free report.  But what they don't know is that the three credit reporting companies sometimes give lenders a different number.  Not only that, some lenders use different criteria, so you may think with a 750 you are qualified for the lowest interest rate, but their criteria and risk management is different than other lenders, and you may end up paying an extra point or so.

The three companies are Trans Union, Experian and Equifax.  Their numbers are called FICO scores and they range from 300 to 950.  All this time, I thought they were up to 850; so my score isn't as high as I thought.  Yours may not be either.  The higher the score, the better for a mortgage as it means your risk of default is less. 

If you find out your score is lower than you thought and you get a report and there are no errors on it, then you need to start working on getting it higher.  Pay all your bills on time and even pay more than the minimum.  Close those accounts you don't use, as the more cards you have, the more risk there is you could default.  If you have a credit card that would work at department stores, you don't need the store card.  Pay down high balances, and don't apply for new cards.

If when you go to get a mortgage loan don't just take the first loan offered, shop around for the best loan.  Also if there are errors on your report, get them corrected.  Find out if you put more down, if the interest goes down.  It might be worth coming up with more cash to save interest over 30 year time period. 

The credit industry is confusing, and buyers need to be better informed and educated about how the system works.  Usually an experienced realtor can help you in that department.  Sometimes the realtor knows about all the lenders in your area, what their parameters are and who is easier to work with, so be sure and work with a realtor.  They do more than show houses; they educate you in the complete process of homebuying from shopping, credit, insurance, appraisals, inspectors, and closing.  Since the seller pays their fee, don't be afraid of getting your own realtor and letting them help you through this confusing time.  It might relieve alot of your stress by having this expertise right at your fingertips (by dialing her phone number!!)