PLUS Score Vs FICO Score
Part One of this post (Why You Don't Need to Pay for Your Credit Score) covers why you should be wary of using a site such as FreeCreditReport.com to obtain your credit report or credit score.
In this post, you'll learn why the credit scores you pay for are meaningless.
Experian's PLUS Score
Let's again use FreeCreditReport.com.
If you look at the screenshot below from the company's home page, you’ll see a red box around the verbiage stating it uses the PLUS score.
The PLUS score is NOT the same as the FICO score. Experian developed the PLUS score.
The FICO Score
Fair, Isaac Corporation developed the FICO score for lenders and businesses offering credit. The original FICO scale went from about 350 to 850; Fair, Isaac has developed a newer scale that goes up to 950.
Scores are calculated using information from your credit report but how the credit scores are developed depend on how Fair, Isaac and Experian input the data variables.
The FICO Score is calculated using: payment history, amounts owed, length of credit history, new credit, and types of credit used. You can see the breakdown in the chart (courtesy of MyFICO.com).
It's very important that you understand the difference between the PLUS Score and the FICO Score. Why?
Banks and mortgage companies will not lend based on a PLUS Score, they work only with the Experian FICO™, Equifax Beacon Score™ and the Trans Union Classic Score™.
Obtaining a PLUS Score from a free website won't help you avoid credit pulls when shopping around for a mortgage because the PLUS Score is virtually meaningless. Lenders will insist on pulling their own reports.
Should you know your credit score before shopping for a mortgage?
It's impossible to "know your score" before you shop around, mainly because your score is always changing, and secondly because it really doesn’t matter what the score is on the report you hold in your hand.
The only thing that matters to the lender is the score on the report they hold in their hand – the one they pulled. No bank or lender will determine loan worthiness based on someone else's credit report, ever.
You could, however, authorize one lender to pull your credit report and then request that the report be emailed to you the same day. You could then use that report (and the official scores contained within) to call around for mortgage quotes.
Beware though: getting quotes off another lender's report, even with the official scores, doesn't assure you anything. The lenders "quoting" you rates and fees will eventually have to pull their own reports and the quotes may well change at that time, negating any benefit to managing this process yourself.
Save your money: deal with lenders you trust instead
The best route to take, however, is to simply stop all the games with the credit reports, and instead call two or three banks and mortgage companies you can trust and let them do their thing.
Given my experience, most customers know where they stand with their credit. If your score is just a few points below a certain threshold we can help you get those five or 10 points back in just a day or two.
Will it negatively impact your credit score if you have multiple pulls? No. Five mortgage inquiries in a given 30-day period are collectively viewed as one single inquiry by the credit bureaus, so feel free to have your report pulled a few times.
Just don't go overboard because your credit report will be pulled several times during the actual loan processing with the company you choose to do business with. You don't want your scores to drop in underwriting – bad news!
If you have questions about your credit report or your credit score – or you're considering purchasing a home or refinancing the one you have, give us a call. One of our Loan Officers will be glad to help you determine the best loan package for you.