> ONLINE FICO "FAKO" SCORES vs "MORTGAGE" CREDIT SCORES

22 Replies

A 700 credit score isn't as good as it used to be.  And those worthless Online scores are generally a lot higher that Mortgage credit scores.

New Mortgage Credit Scoring  (un-official chart)

840 - 800 Extremely Good

799 - 760 Excellent

759 - 740 Very Good

739 - 720 Good

719 - 700 Above Average

699 - 640 Average

639 - 620 Below Average

619 - 600 Poor

599 - 550 Very Poor

549 - 500 Very Bad

499 - 350 BTR  (Born To Rent) or (Better To Rent)

Online consumer FICO scores even though pulled through Equifax, Trans Union and Experian are NOT mortgage credit scores.

Every product has a different scoring module. Trying to finance a car would show different scores than a trying to finance a boat or applying to obtain a credit card, etc.

So attempting to shop for a mortgage using on line credit scores could be a huge waste of time. This is why fully applying for a Mortgage and knowing your "Mortgage" Credit Scores is so important.

I hate the conversation I continuously have with clients....my credit score is 750, but your lender says it is 700.  I need to get a credit score hand out or something to explain all the various scoring algorithims.

Oh yeah, everybody and their mother says they have over 700 scores.

Now, if a borrower says they keep up with their scores and they are in the 800s, then they're generally at least in the mid to upper 700 range with "Mortgage" Credit scores.

But when you ask a borrower what their credit score is and they come back with the classic..."I don't know, last time I checked it was okay"...BEWARE!  

After they have run their realtor(s) ragged showing them 40+ homes over 5 weekends, and after they have a sales contract and they finally allow you to pull credit and it says..."Hold For Cash Reward" at the bottom of the report, not so good!  ha

Why are you guys "hating" on the buyers/borrowers for going by the new Vantage 3 scoring that Credit Karma and every other "free credit monitor" service out there is now going by? When people login to one of these services that use the Vantage3 scoring system, the borrower is being told by what the media has sold as a credible company, that their score is XXX. So when these borrowers engage professional lenders and mortgage brokers, the borrower is also expecting a level of service from that "credible broker". So why the animosity towards borrowers that may not have 100% of the right knowledge of their scores? These borrowers that you're scoffing are the people that keep lenders/brokers in business...

Probably not the best marketing to blast borrowers for "being stupid" on the BP forums, if you're a lender (or moderator)... just sayin!

@Marty True on a seperate note....can you use Realty in your business name in Florida if you are not providing real estate brokerage services?  It's illegal to do so in I think all 4 of the states I do business in. I assume thats the case in most places, but maybe not.  Florida does allow net listings, I think the only state that does, so it also might be more liberal with other issues that are not kosher in other states.

@Russell Brazil not sure if this line of posting is how you became a "moderator" but you're making some pretty bold implications in your completely off-topic response. I realize that I may have hit a nerve with my post, but you're a out of line here.

Perhaps you should do your own research or consult with a Florida attorney before making comments like that. And as a "moderator" it would be more beneficial for the members of BP if you were to respond on-topic.

Originally posted by @Marty True :

@Russell Brazil not sure if this line of posting is how you became a "moderator" but you're making some pretty bold implications in your completely off-topic response. I realize that I may have hit a nerve with my post, but you're a out of line here.

Perhaps you should do your own research or consult with a Florida attorney before making comments like that. And as a "moderator" it would be more beneficial for the members of BP if you were to respond on-topic.

 Im not accusing you, Im asking, and asking for your benefit so you can look into it.  Like I said Florida is more liberal on some of these things for other states and I dont know Florida law.  But you dont want free advice, just dont take it. Good luck in your business.

@Marty True , you are not in lending, so you don't have the Daily issues with borrowers who act like running their credit is going to totally destroy their hopes of getting a loan.   Yet, lenders don't want to review loan files without the 2 most very basics: (and for good reason too)

1. a complete loan application

2. a current "Mortgage" credit report with "Mortgage" credit scores

So Mr. Realtor, how many rabbit holes would run down, meaning how may wasted weeks of time and effort should a Mortgage Broker spend chasing rates and loans terms for someone claiming they have a 744 score and how many homes should a Realtor show them, only to finally allow a credit pull and you find they have a"Mortgage" score of 688, when this issue could have been addressed from day one?  

Now you have to completely shift gears and head a different direction, with higher rates, higher costs and lower LTVs.  Then suddenly the borrowers feel they should still be able to get the same terms as a 744 credit score borrower and go shopping "online."

And everyone knows what that means, they'll likely run into a LO who needs to meet an application quota and will tell them anything they want to hear just to sign the deal up, regardless if it has a snowball's chance in closing on the terms they quoted or closing at all!

@Steve McRory you're right, I'm not in lending, nor am I a realtor. I'm an investor... a borrower myself.

I'm not implying that there are not challenges in lending and I think that a healthy conversation about it would help both sides of the coin. My issue with the original post, and some of the replies, was simply that the tone is quite condescending and paints a picture that us "borrowers" are whining idiots.

I think that if this topic can be discussed in a more productive way, both sides could potentially benefit.

Should I not be so blunt and straightforward?

I believe that is what makes this site different than others to hear all sides,  blunt and unsugar coated from those of us in the business so those who are not in the business can benefit from straightforward discussions.

 I don't believe any serious investors are getting their feelings hurt from me telling it like it is,  maybe a few Realtors. ha

Do you have any insight as to why the credit bureaus and lending institutions can't just settle on a standardized system?  How can buyers not be misinformed based on the current state of conflicting systems and varying data points?

Jeremy Z,

How to know what your Mortgage Credit Scores are?  Try the correct and common sense approach, fully complete a 1003 / loan application (industry slang called the Ten'o Three) and allow a lender to pull a TRI-MERGED MORTGAGE CREDIT REPORT and send you a copy of your scores.    

Its like the Wizard of Oz, the man behind the curtain pulling levers.  Credit scoring drives us in the mortgage industry insane too!

You'll get a first time borrower, little credit history, few accounts, busting out a strong 735 score.  Then you'll get an established multi-millionaire, with 25 yrs in the credit system, 10 prior mortgages, never missing a beat, flawless, and you'll pull a 698 on them.   Crazy! 

Since I posted this discussion, I've had 6 borrowers contact me from my magazine ads, website and referrals, and guess what?   Three of them have "outside the box" mortgage situations, and want me to put forth full 100% effort, but without obtaining a Mortgage Credit report saying... "we don't want our credit pulled before you are 100% sure you have a lender who will fund the loan"  WHAT?!?! 

So they want to send me into combat (i.e. 2018 post Dodd Frank Act mortgage market) riding donkey, swinging a butter knife!  They'll have a better chance in seeing Elvis in K-mart than obtaining decent loan terms with such "bass-ackward" requests in today's market! 

These lender reps at Banks and Mortgage Lenders who offer the very best terms and/or flexibilities are overwhelmed with applications.  Do you think they want to spend one minute reviewing an incomplete application without a Mortgage credit report..."mind deal" with so many other fully completed applications with current Mortgage credit reports?

I wish this was advertised I just realized this a few weeks ago. credit karma and credit sesame are all roses and candy but pull a experian rating and I'm 100 points south of what I thought.

When you apply for mortgage, the (3) credit bureaus are Equifax, Experian, and Transunion. There will be 3 separate FICO scores. Lender will toss high and low, and take middle score.

Terry

If you are applying for refinance or purchase loan, the magic target FICO is 740. That is the minimum score for best rates or " A paper". If you don't know your FICO score by heart, that would indicate you might not have put much thought into your finances. 

To remind myself the importance of FICO scores, I named my dog FICO instead of FIDO.

Terry

this is strictly in regards to the differences in scores REAL scores meaning the ones shown online on the listed sites and the different "algorithms" used in a"mortgage" score

The misguided expectations that have resulted from consumers (myself included, go CreditKarma!) reviewing their scores online with some of the more recent scoring models (Vantage 4.0, here's looking at you) are quite painful in lending. It's can be a rather difficult conversation when trying to explain to a borrower why their CreditWise or CreditKarma scores are 60 points higher than what their true FICO Classic 5 is (what several lenders use). 

From the borrower's standpoint, I understand the dilemma you're faced with as well: "I can get a real credit report from myfico.com for $60, so I know where I really am and what I qualify for, but then the lender is probably going to require their own report... which means 2 hard pulls."

The free tools are a great resource for us consumers to manage trade lines, credit exposure and educate oneself on the basics of their credit score and what it's comprised of, but they're not a weapon to take to lenders demanding better rates and terms.

Other lenders out there - what are your thoughts on the matter?

Steve, thank you thank you thank you for the honest post! I firmly believe that one's/spouse/business/LLC credit scores are the 1st step in real estate. Could you post a commercial version based on the 1 - 100 range from DnB and any Experian info. that you may have for those on BP that might want to do a LLC etc. From what I understand, it used to be 80+ but are there new guidelines as of the past few years?

I told my lender I had a 728 when I went to get my last loan, because that's what Experian told me. He pulled my report and it came to 768. is that normal @Russell Brazil ?

What about the legitimate FICO scores now being provided by many credit card companies to card holders in good standing? 

Originally posted by @Donald S. :
I told my lender I had a 728 when I went to get my last loan, because that's what Experian told me. He pulled my report and it came to 768. is that normal @Russell Brazil ?

 Id say usually its under, but it can be higher

This issue isn’t as simple as a ‘mortgage score’ and ‘consumer FICO’ score. The credit bureaus and financial institutions are 100% to blame.

Each bureau offers TONS of scoring models that they market to financial institutions. Not to mention custom scoring options as well as decisioning-as-a-service for hosted 3rd party applications.

Scoring options range from auto-adjusted for improved automobile underwriting, region-based scoring, yearly updated FICO scores, etc. On a yearly basis my company probably adds twenty new score models into our loan origination software to keep up-to-date. Including legacy scores models, I would guess we have 20 variations on FICO alone.

It has also been my experience that very few financial institutions pull a tri-merged report. Most have a primary and then back up credit bureau for outages or customer credit report disputes. Credit pulls cost money and require disclosures, if credit can’t be granted, so there is an interest in limiting pulls.

I’ve spent many years working with the top banks & CUs in the country to implement origination software and re-work the board lending policy into an automated underwriting engine. Including automated credit pulls, identify verification, etc. Admittedly, our system processes consumer loans & 2nds... not 1sts.

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