CREDIT CORNER-Episode 1
“My Credit Scores Are Over 820. Why Does My Mortgage Lender Say 744?”
It’s a question that can be surprising—and frustrating—for someone preparing to buy or refinance a home:
“When I check my credit, my scores are above 800. Why is my mortgage qualifying score only 744?”
Here’s a real-world example:
A borrower saw VantageScores above 820, while the mortgage credit report showed a 744 qualifying middle score.
Was something wrong?
Not necessarily.
The 820+ scores weren’t simply “reduced” to 744. Instead, the borrower’s credit information was being evaluated using different credit-scoring models—and those models produced different results.
You Don’t Have Just One Credit Score
Many consumers understandably think an Experian score is an Experian score, an Equifax score is an Equifax score, and a TransUnion score is a TransUnion score.
Credit scoring is more complicated than that.
Experian, Equifax and TransUnion maintain credit information, but different scoring models can evaluate that information differently.
Consumers may encounter VantageScore or various versions of FICO through credit-monitoring services, banks, credit-card companies and other financial services.
As a result, someone could see:
Consumer VantageScores: 820+
while a mortgage credit report produces:
Mortgage qualifying score: 744
That’s a difference of more than 75 points.
And it does not necessarily mean either score is incorrect.
VantageScore vs. Mortgage Credit Scores
VantageScore is one of the credit-scoring systems consumers may encounter when monitoring their credit.
But when you’re applying for a mortgage, there is another important question:
Which credit-scoring model is being used for this mortgage transaction?
Mortgage lending has historically relied upon specific FICO-based models. However, credit scoring in the mortgage industry continues to evolve, and newer scoring models, including VantageScore, are becoming part of the mortgage landscape.
The important takeaway for borrowers is that not every lender, investor or loan program necessarily uses the same scoring model in every situation.
That’s why a credit score you see through a consumer service may be substantially different from the score being used to qualify you for a particular mortgage.
Why Can 820+ and 744 Both Be Correct?
The best way to understand the difference is that an 820 wasn’t necessarily turned into a 744.
Instead:
The same underlying credit history can be evaluated by two different scoring models—and produce two different scores.
Different models may place different emphasis on factors such as credit-card balances and utilization, payment history, age and mix of accounts, recent credit activity and inquiries, installment debt, collections and other information contained in the credit file.
Timing can matter as well. Creditors report account information at different times, so the information available when a score is generated can also affect the result.
What Is the Mortgage “Middle Score”?
When a mortgage credit report provides three usable scores for an individual borrower, mortgage qualification has traditionally used the middle qualifying score—not the mathematical average of the three scores.
For example:
Experian: 752
Equifax: 744
TransUnion: 731
The middle score is 744.
That’s why your mortgage professional may refer to a “middle score” when discussing your credit.
Which Credit Score Should You Pay Attention To?
It depends upon why the credit score is being obtained.
A consumer credit score can be useful for monitoring your overall credit profile.
But when you’re buying or refinancing real estate, the more relevant question is:
“Which credit score will be used for my mortgage?”
The answer can matter because credit scores may affect loan eligibility, mortgage insurance, interest-rate adjustments and, depending upon the circumstances, which loan program or lender may be appropriate.
Broker’s Edge Tip
If you’re preparing to purchase or refinance real estate, don’t automatically assume that an 800+ score displayed by a consumer credit service will be the same score used for mortgage qualification.
Before making financing decisions based upon a score you’ve seen online, find out which scoring model you’re looking at.
And if the mortgage score comes back substantially different, don’t immediately assume there’s an error.
There may be a much simpler explanation:
You’re looking at two different scoring models.
🔎 BROKER’S EDGE – Smarter Real Estate Lending
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📞 Steven Hook | Residential & Commercial Mortgage Broker
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IMPORTANT CREDIT DISCLAIMER
This information is provided for general educational purposes only and is not credit-repair, legal, accounting or financial advice. Credit scores are calculated by third-party credit bureaus and scoring companies using proprietary models. The scoring model used for a particular mortgage transaction may vary by lender, investor and loan program, and industry requirements may change. We do not control or guarantee any credit score, change in a credit score, loan approval, interest rate or loan terms. Consumers should review their credit information for accuracy and contact the appropriate credit bureau, creditor or qualified credit professional regarding disputes, corrections or individualized credit advice.
