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The Myths + Truths about Credit Inquiries
Manage episode 333249530 series 3366757
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The Fair Isaac Credit Corporation began operations in the early 1950s and is known as FICO. The organization had already begun conducting data analytics prior to the formation of Experian, TransUnion, and Equifax. They wanted to create transparency and consistency with their data. Keep in mind that back then, there were no computers, but these businesses all had the unified goal of providing a scoring system that could be used across the board.
The organizations we now know as the main 3 credit score companies realized that since Fair Isaac was analyzing data anyhow, they could design a model that would calculate a credit score based on a person’s borrowing and repayment history, among other factors. It was at that time the FICO score first became available to consumers.
When you apply for a loan, a credit check will take place, and in this episode, we’re going to debunk some myths and share some truths surrounding the credit check process.
First, when someone calls about a loan and leads the conversation by sharing their credit score number, my first question is, “Where did you get your credit score?”
By no means are we discouraging you from obtaining your score from other sources like your credit card company, Credit Karma, and the like, because monitoring your score is beneficial to the overall health of your financial life. However, you should know lenders are required to always pull a credit report (and we all use the same system so your rates are being quoted fairly across lenders) when initiating financing.
In this episode, you’ll also hear:
- Facts surrounding your credit score, what’s cumulative, and what’s shown when your credit is pulled from FICO
- When you apply for a loan, expect your loan officer to receive a slightly different credit score than what you saw online
- The credit score mortgage companies employ does not consider the inquiry for a period of forty-five days, and the score remains accurate for four months.
Must-listen moments:
[4:26] Lenders are required to adhere systematically to a single, unified source for scoring credit. If not, the banks wouldn’t be able to sell the loans to one another.
[7:40] It’s not the inquiry that’s going to harm your score, but everything else you’re doing with your credit may, and there are a few reasons this is the case.
[8:30] Why it’s recommended you have a lender pull your credit report four to six months before you begin the house buying process.
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