Your Top 4 Credit Reporting Questions Answered
by Adam Colberg, NMLS#536180, Branch Manager, Fairway Independent Mortgage Corporation
Your credit score is an important part of any loan process, including the mortgage process. However, there is still a lot of confusion as well as misconceptions that surround this magical number.
Let’s check out some of the top questions consumers have about credit reporting.
I see offers all the time for free credit reports through credit card statements, TV commercials and social media ads. Is it a good idea for me to take up these offers?
In general, it’s not recommended to participate in offers for free credit reports because they are usually associated with baiting and enticing you to subscribe and pay for additional services you may not want/need.
By law, it’s your right as a consumer to receive a free copy of your credit file once annually from all three of the major credit bureaus through any of the following methods:
- By internet: www.annualcreditreport.com
- By toll-free telephone: 1-877-322-8228
- By mail: Complete the Annual Credit Report Request Form, and mail it to the address indicated on the form.
These are the only free credit report options recommended by the Consumer Financial Protection Bureau.
Will I be able to see my actual credit scores when I get my credit report?
No, you will not receive your credit scores in the free reports, but that’s okay! You really don’t need to see them, and it’s generally not smart to pay to receive them if the option is made available to you when you order your reports.
The scores you would receive may not even be useful to you because they will not represent the same credit scoring that would be used for mortgage credit evaluation purposes. Scoring is provided differently depending on who requests the report and for what purpose.
So, how are credit scores calculated?
There are many types of credit scores available to you, as well as to banks, financial institutions and lenders. Each credit score is highly dependent upon who requested it, for what purpose the score was requested, and who provided the score to the requester.
According to the Consumer Financial Protection Bureau, any credit score may depend on five things:
- The data used to calculate it
- The scoring model used
- The source of your credit history
- The type of loan the score has been requested for
- Even the particular day when the score is/was calculated
This may seem confusing, but think of it this way: The higher the risk, the lower the score is likely to be. For example, an unsecured credit card would be a much lower financial risk to the credit card provider than a mortgage loan would be to a mortgage lender, right? Therefore, it’s likely that the credit score obtained by a credit card institution would be higher than the credit score obtained by a mortgage lender.
Okay, I received my free annual credit reports and found errors. What do I do now?
When you receive your free reports, instructions are included that describe how to dispute the reported information through the bureaus. Once you’ve requested a dispute, the bureau has 30 days to investigate your claim and provide you with a decision about whether or not the disputed account information will be updated as you’ve requested.
Additionally, the Federal Trade Commission provides some great materials explaining how you can dispute credit report errors: Disputing Errors in Your Credit Report.
Staying informed about your credit score and requesting annual reports are two important steps to managing your credit score responsibly.
As an informed consumer,
you can walk into the loan process with the
confidence needed to see you through.
ADAM COLBERG, NMLS#536180, is a Branch Manager at a Frisco branch of Fairway Independent Mortgage Corporation. He is located at 8501 Wade Boulevard, Suite 1310, Frisco, TX 75034 and can be reached by phone at 972-984-8662 or by email at email@example.com.