​​Consumer Credit Reports VS. Mortgage Credit Reports

When beginning the process to become a homeowner, it would be wise for you to review your credit profile before your lender does. You should be aware; however, that the credit score you review may differ from the one your lender will pull, here’s why. 

The “Big Three” credit reporting agencies are Trans-Union, Experion, and Equifax. However, the Fair Credit Reporting Act (FCRA) also recognizes dozens of other “information technology” companies as nationwide specialty “consumer credit reporting agencies.”   

Consumer Credit Reports

There is a distinct dissimilarity between the "consumer credit" analysis process and a "mortgage lenders" consumer credit” analysis process. The Consumer Reporting Agencies have many different programs for sale.

When a consumer receives a credit score, it may come from a different modeling company or could be an imprecise version. In addition, each reporting agency performs a different algorithmic credit scoring examination.

 In most cases, consumers obtain generic credit scores and compare them to the lenders “tri-merge” credit scores and they turn out to be dramatically different.

If you received a credit report from a third party provider such as “freecreditreport.com”, you will receive an estimated score, which may be wildly inaccurate. When you pull a consumer credit report, a soft pull or blind inquiry is recorded within your credit history. Those pulls will only be visible to you and not affect your scores.  
Mortgage Credit Reports:
                          Mortgage lenders use a more complex evaluation process to determine the potential                               payment practices on their loans. The big 3 credit bu their own proprietary assess-                                  ment methods that offer the mortgage lenders credit repositories, the specific   information necessary for them to render the best possible scoring method.

The mortgage credit report or "tri-merge" report will include “public records” data from the local and federal court systems. Those accounts include bankruptcies, judgments, liens, credit inquiries, and fraud searches. Those proceedings are usually the most inaccurate on consumer credit report since the courts don’t report to them with current data. 

The Consumer Financial Protection Bureau released a report, saying "one in five consumers receive credit scores from mainstream credit bureaus that conflict with scores used by lenders." A home buyer's credit score contributes to the overall interest rate on a mortgage and can impact affordability issues.

Again, we reiterate that you should seek to have your credit reviewed by a mortgage professional early on in the process. This step will give you a much clearer perspective and potentially save you time and money,