Should you rely on a credit score app when you are ready to buy a home?
I am not writing this to denounce the online credit apps out there. Rather, I want to set expectations about your credit score and your ability to qualify for a mortgage loan. You see, those nifty apps you can get on your phone, Quizzle, CreditKarma, CreditSesame, etc. are excellent indicators of your credit. However, the scoring models that they use are not the same models that lenders use. When you are ready to buy a house - you want to rely on the same models that banks use.
What is the difference between the credit models?
The online credit tracking services use a scoring model called Vantage. The majority of mortgage lenders use the FICO scoring model. Both methods will give you very similar results/scores. The difference is the means that they use to get there. There will be varying differences between the models and the scores that they produce. It is pretty safe to say that a person with poor credit will reflect poor scores with both models. Similarly, a person with excellent credit will shine on both systems.
The difference comes down to what do you want to do with the information. If you just want to track your score, protect yourself from identity thieves, and quickly catch errors, then you may want to consider using one of these apps. If you are ready to buy a home, then you need to talk to a lender. A lender will look at your FICO score and make recommendations on how to improve it to qualify for the best loan products. It is important that your actions to improve your credit will reflect most favorably on the FICO model.
Do you know the best way to improve your credit score?
Your mortgage broker does. This is why I always suggest my buyer clients begin talking to a lender several months ahead of buying a home. When mortgage lenders make inquiries on your credit, they have very little if any impact on the credit score. However, the plan that they give you to improve your score will have a tremendous impact.
Paying off credit cards may sound like a great plan. However, your lender may have other suggestions. They may propose getting your credit balances to a more favorable percentage across the board. They know all the ins and outs of achieving optimal credit worthiness.
Are you ready to buy a home?
Start with a plan. Do you need a plan? I've got one.
I often write about buying a home. It is my passion and I love helping others reach the goal of home ownership, whether that be buying for the first time, upsizing, or downsizing. I've covered it all and will make sure that you have a great experience.
One of the first things I will tell you if you will be taking out a mortgage, is to find out about your credit. The best way to do that is to talk to a lending expert. Now that you know what you can afford, check out the homes that suit your needs right here.