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When is your credit score not actually your credit score?

How about when you’re applying for a home loan.

I can’t count how many times a frustrated veteran has come to me demanding to know why the credit score they paid to obtain doesn’t match what a lender is telling them. Prospective homebuyers are often confused, chagrined or downright catatonic when they learn mortgage lenders see a different score than they do.

The reality is lending agencies rely on unique scoring formulas weighted for mortgage-related factors. It’s a risk-hedging move designed to help banks better assess whether you’re a good candidate for the financial responsibility of a mortgage.

That’s often a frustrating revelation for potential borrowers.

The consumer-centric score you might purchase from an entity like FICO can still provide a solid sense of where you stand. But its limitations are especially glaring for borrowers on the edge.

You probably won’t know the exact scores used by a particular lending agency until you’re either approved or denied for a mortgage. That’s one more reason it’s so critical to stay on top of your report and be responsible with credit.

Mortgage Credit Score

Credit scores aren’t monolithic. FICO’s model is the predominant score among creditors, but each of the three major credit bureaus uses different methodology and includes different consumer information. For example, one of your creditors may report to all three agencies, while another only reports to one.

The credit bureaus ­– Equifax, Experian and TransUnion — will gladly sell you a look at your three-digit credit score. But what you’ll get is considered a “generic score,” which is more of a blunt educational tool than a sharp data point.

When mortgage lenders conduct a hard credit pull, they see three scores that take into account your personal history with home loans. These numbers can be higher or lower than the generic score you shelled out $20 to see.

Lenders will typically use those three scores as a range and fixate on the middle one.

In the current economic climate, VA-approved lenders are generally looking for at least a 620.

But even the clearest explanation falls short when you’re talking to a military member who just learned his generic 630 score is a 610 in the mortgage lending world.

Generic Scores Still Matter

Despite the discrepancies, it’s still important for prospective homebuyers to scour their credit report and investigate their generic scores. This is a number that will govern not just your ability to qualify for a loan but the interest rate you’ll pay over the life of the mortgage.

Consumers can use their generic score as a soft guide to calculate what they can afford. A solid generic score is routinely indicative of your industry-specific one. Here’s what FICO says on the matter:

“Checking your credit scores from a trusted seller can often serve as a guide for pointing you in the right direction. If you pull your credit score from a reputable source and find that you have a very high score, then more often than not, you’ll have a good FICO score as well.”

If you want to buy a home and find your generic score lacking, consider it a signal that it’s time to put some effort into boosting your score. Veterans and military borrowers can also contact the Department of Secondary Approval at Veterans United Home Loans for help (Disclosure: I work for Veterans United). This wing of the country’s top dedicated VA lender helps any military member or veteran develop a plan, with no strings attached, to boost their score and get on the path to loan prequalification.

This story is an Op/Ed contribution to Credit.com and does not represent the views of the company or its affiliates.

Image: Wavebreak Media

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  • Will

    It’s worth noting that if you are declined for ANY loan the lender is legally obligated to give you any scores they used to determine this. Obviously they won’t offer this information unless you specifically ask for it.

  • Vern

    I ,ll tell you one thing, if you really need the credit you probably won,t qualify.

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  • b

    Thats how credit works. Those who need it cant get it because they need it. Those who dont need it get it all because they are low risk..and rarely use it because they dont need to. You will only have good credit when you make enough money that you dont need your credit anymore. The key to financial success is to focus on making more money not repairing your credit.

    • Snoop

      “You will only have good credit when you make enough money that you dont need your credit anymore.”
      That is COMPLETELY INCORRECT! My goodness… I hope no one took this silliness seriously! You need more than “make enough money” to have good credit. You have NO IDEA the harm you’re proselytizing!

  • yenia horton

    Hello Estoy discgustada porque jamas en mi vida e tenido mal credito solo tengo 3 anos de tener credito en EU, y me lo an danado injustamente solo porque quede mal con una tarjeta de credito de el bbva pero no fue por negligencia si no porque tenia que viajar a mi pais Panama de emergencia y mi esposo quedo encargado de hacer los pagos y se le paso pero esa tarjeta era por 2,000.00 y solo quedo un saldo de 900.00 eso fue lo que me iso quedar mal y no fui yo directamente y despues se iso un arrego de pago y el pago 200.00 y quedo 700.00 y ellos no an mandado mas recibo de ese banco y queremos pagar pero lo mas curiosoes que e tenido otras tarjetas de mall y las e cancelado y las doe que me quedan de el mall se pagan todos los meses sin parar y no es gran cosa el credito es bien bajo, entoces ud porque me tienen mal credito
    no es justo a mi me gusta ser responsable con mis pagos , por ejp quiero en este momento una tarjeta e credito de el chase que es de millas y todabia no me an contestado y lo mas provable me digan no por causa de ustedes que ya tube chequera con ellos y quede bien , mi unico herror mas bien el de mi esposo es habercatrasado en la otra y yo esa del bva pagaba atiempo y mucho mas de lo que era ,porfavor busquen otro metodo mas moderno para que no perjudiquen al consumidor , yo traabaje en tres bancos en mi pais Royal bank of Canada, Banco Nacional de Panama ,
    Banco Santander, y se lo que es trabajar con banco soy Lic en Turismo y me dedico cuandoestoy en mi pais que adoro trabajo en Bienes Raices ,,,,,estoy en EU porque mi esposo es Norteramericano anglosajon y tengo mas de 11 anos de estar casada con espero que porfavor me arregen mi credito porque me estan haciendo mucho dano injustamente…..Yo estudie en parte en EU y halo el ingles y lo leo escribo pero me encanta usar mi lenguajes se de algunas leyes Sres,,,,,,,,,,l

    Atte, Yenia Horton

    Ps,,,,,, espero me contesten amablemente ademas yo trabaje con el comando Sur de los EU en Panama cuanestan con nosotros y siempre mne expresado bien de udes y e peleado por ese pais verbalmente………..muchas gracias espero esto no se quede en el aire y busquen un lugar donde podamos dar sugerencias,,,,,,,,,,,,,,,,,,

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  • mike irwin

    can i get a va home loan with a credit score 580

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