When applying for a mortgage, how are the 3 credit scores used?

Question

Do they use the average, the middle one, consider all three?

Also, I have a 30-day late and a collection account from early 2001. When will these go away?

My 3 scores are 694, 714, and 750. I have no other lates or anything since those two in 2001. Planning to buy a home next summer (2008) after I pay off my credit card debt. (That's the only other thing affecting my scores, which are better than I expected!)

Experian 694
Transunion 715
Equifax 750

I have 7 inquiries on Experian (and none on the others) so I think that's why it's lowest. 2 cars purchased in the last 2 years (2 inq for each of those), a landlord credit check, and a few 0-percent credit cards that I transfered high interest rate balances to.

The collection account was paid in Feb or Mar 2001. The "open" date is 6/1/2000.

Answer 1

Stuff stays on your credit report for 7 years so they'll go away sometime in 2008.

The three credit scores should be pretty close to the same as all three agencies are getting the same information. They may be off a bit. Usually the mortgage lender uses one of them. If they use Equifax, they'll use that score. But the scores will likely be pretty close to each other anyway.

The stuff from 2001 should not have a lot of effect on whether or not you get a loan if you've been current on everything since then.


Additional Info note: I'd be willing to bet that 694 is Equifax. For whatever reason, they're my lowest one too. I don't know why. But your scores are really quite good. It looks like you've done a great job. Just keep doing what you're doing and in all honesty, I don't think you'll have a problem getting a mortgage at a reasonable interest rate. By the time you go to apply, your scores may have even moved up higher. Keep making on time payments and reduce debt. Those two things will help more than anything and you've only got another year before the late pay and collection drop off.

Answer 2

Since I feel the mortgage and score question was answered, I wanted to mention the following:

Both the late and the collection should fall off in 2008.
Any inquiry's that you have will stay on for 2 years from the date of inquiry. At 6 months they have very little impact and at one year they have no impact (unless a company is extremely picky, but that is rare)

As long as you do not apply for any credit 6 months or more before you apply for a home loan, you should be good on the inquiry's.

The 30 day late will fall off 7 years from the date you were 30 days late.

When the collection fall's off depends on when you were late with the original creditor - the collection agency "must" go by the original creditors date and not their own.

The collection should fall off 7 years from the time you first became 30 days late (with the original creditor) and never brought the account current leading to the charge off.

Be very careful when paying a collection debt.
If you are now outside of the collecting statute of limitations (SOL) you need to find out if your states statutes allow a debt to be renewed upon payment.

If your state allows it and you pay a portion of the debt as payment in full, you would be re-setting the collection SOL on the debt (but not the reporting SOL) Once you reset the collection period the collection company may try to continue to collect, sue or sell the remaining portion of the debt.

If you are past the collection SOL in your state you are not legally bound to pay it. If you want to pay, protect yourself.

A paid negative is no better than an unpaid negative - if you want to pay, request a pay for delete.

You might click on my profile and go to the link to find the collecting SOL for your state. Also do some reading in some of the other links I have listed, such as the FDCPA, FCRA, etc.

Answer 3

Mortgage companies will use the middle score. With a score of 700+ you should not have a problem. But they will also look at your Debt-to-Income ratio to make sure that the mortgage will not put you out of balance.

They may require you to pay off the collection, so prepare for that. Also, they will look at the past 12-24 months and as long as you have not defaulted on another mortgage and you only have 1 30-day late, you should be okay. And DON'T GET ANY NEW CREDIT AND LIMIT THE # OF TIMES YOUR CREDIT REPORT IS PULLED. My Realtor told me that he has had some clients that have gotten all the way to close and messed up because a simple purchase on credit that made their DTI too high to close.

The best advice is to get pre-approve (not pre-qualified) as some sellers will require you to submit that letter with your offer

Answer 4

While applying for a mortgage loan, your FICO score plays an important role in deciding whether you are approved for the loan or not.

For a credit score in the range of 585-599, you may have to make a down payment of nearly 5% to be approved for a home mortgage loan. Even in this case, your approval will come from a subprime mortgage lender. You have to approach a lender who deals exclusively in loans for people with not so perfect credit or in situations that cause difficulties in getting a mortgage.

If your credit score lies between 600 – 620, you might be easily approved for 100% financing. Even in this case, you have to approach a subprime lender.

For a credit score of at least 620, you can easily avail of 100% financing, along with a reduced rate of only 1 - 2 percentage points more than the prime rate.

Answer 5

Lenders use the middle FICO score. The 2 derogs on your credit from 2001 can come off after 7 years. You may need to contact the credit reporting agencies to have them remove them, as not all creditors stay on top of removing derogatory credit as well as they do at reporting it. Good Luck!