When a third party pulls a copy of an individual’s credit profile and scores a “hard inquiry” occurs. This credit review can have a negative consequence to your scores. Do not have your credit pulled by any third party unless there is a very good reason for it like a pre-approval letter. There are windows of time that a series of “hard inquiries” for the purpose of a mortgage will hurt your scores less (usually within 45 days) but what is essential to remember is more than 5 third party inquiries for any purpose can drop scores dramatically depending on the individual’s full credit profile. “Hard inquiries” impact credit scores for one year and stay on credit reports for two.
When you pull your own credit online it will not impact your credit scores. However, the scores that are available online to purchase are usually not the same as the scores used by mortgage lenders.
Most mortgage lenders use the “middle score” as the risk factor. When a report is pulled by a lender it includes merged information from the three credit bureaus Experian, Trans Union, and Equifax. Each bureau has a FICO score that represents the risk of the borrower. The bank takes the middle number not the average.
The score model used by most mortgage lenders has customized versions for each bureau therefore each bureau has created their own name for the version they use. They are: FICO 4 (used by Trans Union), Beacon 5.0 (used by Equifax), and Fair Isaac Risk Model V2 (used by Experian). We refer to these as FICO 4 for an abbreviation. All of these scores are very similar but they have small variations. Lenders tend to follow the score models used by Fannie Mae and Freddie Mac. These scores are currently FICO 4 models and will not be changing any time soon.
The scores sold at the consumer site www.myfico.com are FICO 8 score models and will be changing to FICO 9 sometime this fall. This will cause confusion and larger score differences between the consumer FICO scores and the mortgage banking FICO scores.
If your team would like more info on the details of the differences between the FICO 4 model lenders use and the FICO 8/9 model sold to consumers, plus how to handle questions and concerns of loan applicants, referral sources, and potential home buyers please reach out to us and we will set up a meeting to educate and discuss (stephanie@precisioncreditrestoration.com).
Besides the differences in FICO score models there are also many scores sold online that are not FICO scores at all.
Some of these scores are:
●National Equivalency Score: sold by Experian and it ranges from 360-840 points.
●Vantage 2.0 Score: created by all three credit bureaus and it ranges from a 501- 990 score with letter grades A-F.
●Vantage 3.0 Score: a newer version which ranges from a 300-850 like the consumer FICO score. Although it is the same range as most FICO scores it is not the same.
●Plus score: sold by the bureaus, it ranges from a 330-830 score and is strictly educational.
●Equifax score: sold and created by Equifax and it ranges from a 280-850 score. It is sold for educational purposes.
●Trans Union scores: they range from 300-850 points and are also sold for educational purposes.
The best way to find out what the FICO score used by a banker is would be to have a banker pull credit for pre-approval.
Feel free to reach out to us at 877-292-0656 if you have any credit questions or reports you would like reviewed!
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