Home Loan Approval Issues: Your Credit Report

January 26, 2023

If you want to buy a home with an FHA mortgage, you may find the credit score requirements are more forgiving than some conventional loans. But even with these more lenient approval guidelines, some borrowers still get turned down for a mortgage.

In some cases this is easily preventable. It’s a matter of knowing your credit reports well, knowing what to look for on your credit report, and how to maintain your credit scores. 
But those are the types of things you’ll get advice on from any mortgage lender website or finance site. What about some of the not-so-obvious things?

How Many Credit Scores Do You Have?

Some consumers believe that there is a single FICO score or a single range of FICO scores that determine their access to credit.

But what’s the reality? According to the official sites of the major credit bureaus such as Experian, there are “industry-specific FICO Scores” including those for autos and a separate set of FICO scores for bank cards.

How are these scores calculated? The Experian site says this is done, “from versions of the base and industry-specific FICO® Score models” noting that there are “many different credit scoring models that can give a different assessment” of your credit score.

Experian advises, “your credit rating is often the same even if the number is not.”

Credit Agency Advice

Experian also reminds us of a critical factor in credit reporting; the three major agencies don’t share or collaborate on credit reporting data. What does that mean?

“Your credit report information can vary from agency to agency because some lenders report your credit history to only one or two of the agencies.”

If you read the above thinking your FICO scores may vary from agency to agency you are correct. You will need to follow up any corrections to one credit report with corrections to the other two.

Know Your Credit Reports Well

It pays to use credit monitoring in the year leading up to your home loan application. But by law you are entitled to free credit reports. The Federal Trade Commission official site advises, “The three nationwide credit bureaus — Equifax, Experian, and TransUnion — have a centralized website, toll-free telephone number, and mailing address so you can order your free annual reports in one place.”

FTC.gov advises consumers not to contact the three credit bureaus individually. Instead, visit the official government site AnnualCreditReport.com to order free credit reports.

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Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.

Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing