Steve Verrier is a Mortgage Broker who has been in this field for over 30 years. With interest rates changing, and many people still looking to buy a home or even refinance a home, Verrier wanted to provide some education to the public on Credit Scores, and the reason behind constantly changing credit scores.
“Mortgage brokers like myself are always hearing, ‘But Credit Karma shows me I have a 660 score, what do you mean I do not qualify right now for a mortgage?'” said Steve Verrier of the Florida Mortgage Center.
Steve took this time to explain to not only us, but our readers why all of the third party scoring sites are different and why the scores they show you are not the same as the scores a mortgage specialist or broker will see when they pull it. Below, Steve explains the basics of how credit scoring really works.
“Fair Isaac Corporation or FICO is a publicly traded company based in Ca. The analytics company was founded in 1956 by an engineer, Bill Fair, and a mathematician, Earl Isaac. Vantage Score Solutions, based in CT, was jointly founded by Equifax, Transunion and Experian in 2006. You read that right, FICO was founded by an engineer and a math whiz, Vantage was jointly created by three major credit bureaus. The big three started Vantage in 2006 as everyone was getting their credit scores online and soon on their smartphones. Crazy coincidence, right?
As we in the mortgage world all know, when a tri-merge credit report (containing data from all three bureaus) is pulled, whether the borrower is in Orlando, Fl, or Irvine, CA, it doesn’t matter which company pulls the report they will use the same FICO algorithms to get scoring. FICO 2, 4, and 5, also known as Beacon 5.0, Classic 04 and Fico version 2. Nationally agreed upon mortgage FICO algorithms are a sure-fire way of keeping an even playing field for all borrowers when applying for what usually is the largest purchase in their adult life. FICO scoring range goes from 300 to 850, while some Vantage scoring models cap at 990. Here’s the best part, when it comes to credit cards and car dealerships and the online sites like Forrest Gump’s box of chocolates, you never know what Vantage model you are going to get. Applying for a credit card? Depending on which bureau they use, it could be Vantage 3.0, 4.0 9.0 and they all calculate the same data a little differently. Vantage 3.0 for instance doesn’t include paid collections in their scoring formula. Last time I checked, paid collections still impact mortgage FICO scores, (unless they get removed of course) and most lenders would love to magically erase those nuisance collections. American Express uses the Vantage 3.0 from Transunion. Wells Fargo uses FICO 9 (not a mortgage FICO) from Experian. Chase Bank uses Vantage 3.0 but from Experian. Capital One uses Vantage 3.0 from Transunion. Make sense to everyone? Yeah, me either. I am not going to get into the different Vantage models used by car dealerships and the 10 banks they send one credit application off to like a shotgun blast; but let’s just say it’s not any clearer than the credit card minefield of different scoring models. The most popular consumer scoring site out there, Credit Karma uses Vantage 3.0 from both bureaus, Transunion and Equifax. Did you know that Intuit, yeah the Turbotax and Quickbooks folds, bought Credit Karma for $8,100,000,000 in 2020.
The point to all of this is to use a professional when it comes to mortgages and working on your credit. Credit report providers supply mortgage brokers and others in the field with tools to help improve your credit scores and what actions you can take to improve your score.”
Steve Verrier told us he is always open to education especially when it comes to things like credit reports and scores and the best way to improve them for your future.
