Comments on: How do mortgage companies determine which credit score to use?

By: bdancer222

bdancer222 — Sat, 26 Sep 2009 10:51:49 +0000

Mortgage companies typically use the mid FICO score.

Your husband’s scores are very low. You would have to have a big downpayment and no other debt to maybe qualify for a very high interest rate.

Get a copy of his credit report and start working on fixing the negatives. First, pay off current credit card balances. Carrying balances of more than 30% of your available limit kills your score. Paying them down will give a quick boost to his score.

Second, start contacting the negatives, newest one first and work back to the oldest. Ask for delete for payment — some will, some won’t. The older the debt, the more likely they will settle for less than full balance. If the debt is older than 3 years, offer 25%; 2 or 3, offer 50%; less than 2, offer 75%. Lump sum payment gets the best deal. Payment plans have to be short term.

Get any settlement agreement in writing and keep it along with your payment proof, forever. Don’t give the collection agency direct access to your bank account.

Paying off old debt won’t increase your credit score (unless you get the item deleted); however, paid debt looks better than unpaid. Mortgage companies will require you to settle old debt before approving any mortgage.

You should also put a set a mount in a savings account every payday toward the downpayment and closing costs.

By: Marie

Marie — Sat, 26 Sep 2009 10:51:49 +0000

Having just looked into refinancing myself, the mortgage companies take an average of the three scores.

By: PJ

PJ — Sat, 26 Sep 2009 10:51:49 +0000

Well, although determining your credit score should be an exact science, it isn’t. Each of the three major credit beuroes weigh different aspects of your credit differently. For example, Transunion my deduct more points than Experion for late payments etc. My educated guess is that each morgatge company picks one credit reporting beuro to do business with and they will always select that score. You may want to call the morgatge company to see which credit score they will use.

By: Deo Vindice

Deo Vindice — Sat, 26 Sep 2009 10:51:49 +0000

Melissa, lenders use the lower middle score of the two borrowers, not an average. At one time some subprime companies did stuff like that, but those companies are not around any more.

By: TruthMastaT

TruthMastaT — Sat, 26 Sep 2009 10:51:49 +0000

If the mortgage company has 3 credit scores, they use the middle.

If the mortgage company has 2 credit scores, they use the lower.

They don’t average the scores.

This is based on the underwriting policies of my clients. Other mortgage companies might have different policies (but I doubt it).

They will most likely use the lower of your husband’s scores (540) so the changes are pretty slim. A low score may be mitigated with a higher interest rate or a greater downpayment.

Good luck!