Know Your Credit

There are several types of credit scores you may know about, but did you know mortgage lenders require a tri-merge credit report? This type of credit discovery allows a lender to look at a very complete history of your debts and how you have paid those obligations. Knowing this information is important for a lender to help evaluate risks.

The three major repositories are TransUnion, Experian, and Equifax. These firms send information to a mortgage credit aggregator and lenders buy those reports. This system ensures lenders don’t create your credit score; they simply read it from the report they purchase.

Many lenders use the middle credit score from that mortgage report for eligibility and pricing. This methodology helps ensure fairness of lending, as the lender did not create the score and every applicant is evaluated the same way.

The credit score from each repository can be and is typically different. Using the middle score creates a fair process. The scores from each repository are influenced by many factors. The consolidated report shows a lot of information including: correct legal name, date of birth, current address and previous address, adverse credit information such as late payments, bankruptcies and charge offs. The report shows accounts that have been paid off and accounts that are still open and active. The report will show account numbers if held jointly or independently or as an authorized user. The report shows the date opened, the high balance and the payment amount due.

The specific credit scores each repository assigns are influenced based on concepts like capacity utilization, length of time for servicing and timing of credit inquires. Other factors may also be evaluated in determining your credit score. The good news is lower credit scores can be increased by paying off debts, paying bills when due and by reducing revolving lines to a fraction of max availability.

Many doctor loans require high credit scores as there is no mortgage insurance protecting the lender from default. Typically, credit scores over 720 are deemed acceptable. That, however, is not the only credit factor. Some firms require a minimum active trade line history of 2 years and require at least 4 open active accounts.

This history may provide lenders with a better understanding of a potential borrower's likelihood of timely payments. Some physician lenders will consider loans with credit scores under 720; however, you might expect to be offered a higher interest rate due to the additional default risk.

You can contact the credit agencies to order your report if you want to get an idea of your credit score before contacting a mortgage lender.

Experian: 888.397.3742 or www.experian.com/reportaccess

TransUnion: 800.916.8800 or transunion.com/myoptions

 Equifax: 800.685.1111 or Equifax.com/fcra

Ordering your own report can be informative and that can be helpful if there are errors. If, however, you want an evalutaion, you should contact a lender to know what they are seeing.