Are you under the impression that the credit scores you purchase online from Equifax, TransUnion or Experian are what lenders use to approve and price a home loan?
Then you might be in for a surprise. Yes, you can buy a score online, but it is not one of the FICO mortgage scores that mortgage lenders use. The actual scores used by lenders can be higher or lower by as many as 75 points or more.
The selling of useless credit scores has become such a big business that the Consumer Financial Protection Bureau (CFPB) is trying to stop the practice.
In January, the CFPB charged TransUnion and Equifax for failing to tell consumers about the usefulness of the scores they were offering online. Experian claimed the credit scores it marketed and provided to consumers were used by lenders to make credit decisions, when, in fact, the CFPB said lenders did not use Experian’s scores to make those decisions.
The CFPB ordered Experian to truthfully represent how its credit scores are used and hit the company with a civil penalty of $3 million. TransUnion and Equifax were required to pay some $17.6 million in restitution to consumers and were fined a total of $5.5 million.
It is nice to know your credit score to give you a general idea of where you stand. Seeing your score (whether or not it is the one that lenders use) may prompt you to get an annual free copy of your credit report from each of the three major credit repositories, Equifax, TransUnion and Experian, to ensure the information contained in each report is correct. You are entitled by law to receive a FREE copy of your credit report every 12 months from each of these. To get your free credit reports go to AnnualCreditReport.com and follow the instructions.
If you are planning to purchase a home soon, then you should contact a lender to get pre-approved before you start looking at homes. The lender will pull your credit report and credit score at that time.
Read more about this topic on the Consumer Financial Protection Bureau website.
