“But My Credit App Says I’m a 742!” -Why Your Mortgage Credit Score May Tell a Different Story

“But my credit app says I’m a 742.”

If you’re a loan officer, you’ve heard some version of that sentence approximately 47,000 times.

Then we pull mortgage credit and… surprise.

Maybe it’s 718. Maybe it’s 695. Maybe one bureau is considerably different from the others.

Then comes the completely reasonable question:

“Why is YOUR credit score different from MY credit score?”

Welcome to the confusing world of credit scoring.

You Don’t Actually Have One Credit Score

This is probably one of the biggest misconceptions about credit.

The score you see through a banking app, credit card account or consumer credit-monitoring service may be completely legitimate. But it isn’t necessarily the same scoring model a mortgage lender uses.

Different lenders and industries can use different scoring models for different purposes. You can also have different scores from Equifax, Experian and TransUnion because the information reported to each bureau isn’t always identical.

So when your app says 742 and your mortgage lender sees something different, nobody necessarily did anything wrong.

They may simply be looking at different scoring models and different data.

Consumer scores can be great tools for monitoring your credit. Just don’t assume the number on your phone is exactly what a mortgage lender will see.

So What Actually Determines Your Score?

With traditional FICO scoring, five major categories generally influence your score:

Payment history - about 35%
Do you pay your obligations on time?

Amounts owed - about 30%
This includes credit utilization—how much of your available revolving credit you’re using.

Length of credit history - about 15%

New credit - about 10%

Credit mix - about 10%

This is why two people who both say, “I’ve never missed a payment,” can have dramatically different scores.

For example, keeping a $9,800 balance on a credit card with a $10,000 limit while making every payment on time can still affect your score. Payment history matters, but it isn’t the only thing that matters.

Why Do A Few Points Matter With a Mortgage?

Here’s another misconception:

Your credit score isn’t just about whether you get approved.

Depending on the mortgage product and your overall financial profile, credit can influence your interest rate, loan pricing and potentially mortgage insurance.

On certain conventional loans, different credit-score ranges combined with factors such as loan-to-value can result in different pricing adjustments.

So those extra points aren’t just bragging rights.

They can mean actual money.

Credit information can also potentially affect other areas of your financial life, including auto financing, credit cards, renting and, depending on where you live and the circumstances, insurance pricing.

“But If You Pull My Credit, Won’t My Score Drop?”

I hear this one constantly.

Someone wants to know what they qualify for but is terrified to let a mortgage lender pull credit because they believe one inquiry is going to destroy their score.

Yes, a mortgage credit inquiry is generally considered a hard inquiry and can have a small impact. But a single inquiry typically isn’t going to send an otherwise healthy credit profile off a cliff.

More importantly, credit-scoring models recognize that consumers shop for mortgages.

Multiple mortgage inquiries made within a rate-shopping period are generally treated as a single inquiry for scoring purposes. Depending on the scoring model, that shopping window can range from roughly 14 to 45 days.

So don’t be afraid to compare mortgage options because you think every lender who checks your credit will independently hammer your score.

From my perspective, I’d much rather know what your mortgage credit actually looks like before you fall in love with a house than discover a surprise after you’re under contract.

Credit Scoring Is Changing

Here’s where things get interesting.

The mortgage industry has traditionally relied heavily on older “Classic FICO” scoring models for conventional loans delivered to Fannie Mae and Freddie Mac.

That is beginning to evolve.

VantageScore 4.0 is now available as a scoring option for eligible Fannie Mae and Freddie Mac loans alongside Classic FICO, while FICO 10T has also been approved for future implementation.

Newer scoring models can evaluate credit differently, including the use of trended credit information and, when available, rental-payment history.

In other words, even the mortgage industry’s definition of a credit score continues to evolve.

Before You Start “Fixing” Your Credit…

Please don’t randomly close credit cards, open new accounts, transfer balances or pay off accounts because someone on social media told you it would magically add 50 points to your score.

Credit doesn’t always react the way people expect.

If you’re considering buying a home, have the credit conversation before you’re standing in a kitchen telling your Realtor, “This is the one.”

Let’s look at what your mortgage credit actually shows, whether anything needs attention and what options make sense.

Because the score on your phone is helpful.

Understanding the score that matters for your mortgage is even better.

Have questions about credit, mortgages or getting yourself ready to buy? Reach out. I’m always happy to help you understand the numbers before they become a surprise.

And follow me for more straightforward mortgage information without all the mortgage-speak.

Taking the Guesswork out of mortgages since 2005.

Ryan Guess | Senior Loan Officer| NMLS #70442 |Northpointe Bank

All loans are subject to credit review and approval. This is not a commitment to lend. Other terms and conditions may apply.