Which Score?

Why do you have three credit scores? More than that, why can your scores sometimes be tens of points apart?

What’s the Credit Reporting Agencies’ Role?

You’ve probably heard of Experian, TransUnion, and Equifax before. Every time someone checks your credit — landlords, utility companies, car dealerships, credit card companies, and yes, mortgage loan officers, too — it’s one of these three consumer credit reporting agencies that handles the request.

Where do they find information about you? Several places.

These agencies maintain long-term records about an individual’s credit experience. The most common source of info is from your own financial institutions.

Banks, credit unions, and credit card companies you do business with will regularly report both the good and the bad to credit reporting agencies. Credit reporting agencies also keep tabs on public records, making note of bankruptcies and other financial happenings attached to your records.

What Does My Mortgage Loan Officer See?

Often, when you or a landlord or utility company pulls your credit report, there may only be one report from one of the three agencies. There’s enough info in just one report to judge your creditworthiness for small amounts of credit, and — should one of the reports be off — it generally isn’t enough to result in a major financial snafu.

However, that’s not how things work when you apply for a mortgage.

When you apply for a mortgage, lenders pull what’s called a Tri-Merge report. Even though that sounds like a description of a three-car traffic accident, it isn’t.

It’s all three credit reporting agencies’ files on you combined into one report. Why all three? Because each agency’s score for you can vary based on what info ends up in your reports. For a large, potentially risky transaction such as a mortgage, lenders think it’s important enough to look at all three reports.

Three Reports and Three Different Scores?

Why are the scores different? There are two possibilities.

When the scores vary by only a couple of points, the explanation is that each agency uses a slightly different scoring model.

When they’re off by more than that, usually an error is to blame. All three credit reporting agencies use FICO’s credit scoring system so results shouldn’t be that different. If they are, one or more of the reports may have inaccurate information included or correct information omitted.

So, Which Report Actually Matters?

Looking at the Tri-Merge report, most lenders have a policy of going with the middle score, assuming all three agencies’ reports are slightly different.

If you and a significant other apply for a mortgage together, you end up with six reports. Your mortgage loan officer will take the lowest of the middle two scores.

However, this middle-score approach is sometimes just used for determining the qualifying loan program or pricing. All three might then be considered when the loan is actually underwritten.

Why Do My Reports Not Match?

When you pull your own report, be mindful of what kind of report you’re getting. There are several completely different scoring systems, so the report you’re looking at could be very different from what your mortgage loan officer will get back.

The key is that you won’t be comparing apples to apples if the report isn’t based on your FICO score. That could be a problem if you think your score is 700, but when you meet with your lender at the start of a house hunt and hear you have a 600. The best idea is to either request a copy of your FICO report directly or meet with a mortgage loan officer and ask for a no-obligation review to see where you stand. Once you know where you stand, you can work on improving your score if needed.