Credit scores can range from 300 to 850. The Fair Isaac Corporation set up the first credit scoring system based on credit bureau information, now commonly known as a FICO score. FICO scores are the most commonly used scores. However, there are several other versions and providers of credit scores, such as VantageScore, NextGen, BEACON, and EMPIRICA. You may see differences in your scores as each company uses a different scoring model and algorithm.
How do mortgage lenders use credit scores?
Lenders use credit scores to assess a potential borrower’s credibility. They examine your credit risk in efforts to determine a risk calculation associated with a particular borrower. The higher the credit score, the lower the interest rate. Banks or mortgage lenders legally request credit reports from credit companies.
Where can I get my credit score?
There are a few ways to get your credit score. You can ask your credit card company, purchase your credit report from a credit reporting agency, or get a free credit score from a non-profit provider. Some credit score providers offer ‘’educational’’ credit scores, instead of scores that a lender would use. This is why lenders request credit reports from one of the major reporting bureaus in lieu of asking consumers to submit the reports on their own. The Consumer Financial Protection Bureau (CFPB) published a report on the difference between educational scores and those used by lenders.
Credit card companies:
Major credit card companies and some auto loan companies now provide credit scores to their customers on a monthly basis. You can check your score by logging into your online account or you can find it listed on your monthly statement.
Nonprofit counselors:
This is a good option for low-income earners seeking housing options through HUD (United States Department of Housing and Urban Development). Housing counselors often provide homebuyers with a free credit report and/or score in addition to offering general counseling for housing questions and advice.
Using a credit score provider:
There are many websites that claim to offer free credit score. There are some who don’t charge you a fee because they may be funded through advertising. Other sites may require you to buy a service to check your score for free. Be careful when choosing the services on these websites. If possible, get referrals from your friends, family, or co-workers. Beware of scams and websites that claim to offer a free credit score but are requesting a payment method in exchange.
Go direct to one of the three major credit bureaus:
There are three major nationwide credit reporting agencies – EquifaxⓇ, ExperianⓇ, and TransUnionⓇ. Each agency will provide you with your credit score, free of charge, once per year. They also offer updated credit scores through a paid membership. Lastly, you can get your FICO score directly from myfico.com.
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