Your credit score can determine what interest rate you’ll end up paying for consumer loans, auto loans and your mortgage. Your credit score figures into how much you’ll pay for your homeowners and auto insurance. And yes, your credit score may be used to determine if you get hired for the new job you are applying for.
But here’s the catch-not all credit scores are created equal.
There are lots of different credit scores used for different purposes. Even the credit scores you might buy from TransUnion, Equifax and Experpian are called “educational scores”-which will give you a good idea if you have excellent credit, fall in the middle or if you are a poor credit risk. While this info is useful (to an extent), it won’t help you know where you stand before applying for a home loan unless you know which “scoring model” the lender will be using.
Here are some tips beore applying for a home loan:
- Order a copy of your free credit reports through AnnualCreditReport.com. You will get a report from all three credit bureaus. When you receive your report, check to make sure all the information is accurate, including balances, monthly payments, open and closed accounts.
- If you decide to buy a credit score, buy a FICO score, offered by MyFico.com. This is the one being used by a vast majority of lenders. Only TransUnion and Equifax provide scores and the cost is around $20.
- There are some free services that will give you a general idea of where you stand…CreditKarma.com, Quizzle.com, CresitSesame.com. All of the latter credit reporting sites are free and they also provide some financial tools to use that could be useful as your prepare to buy a home.
Oh, and finally, the National Bureau of Economic Research says that a little more than 1/3 of consumers have actually obtained a copy of their credit report. Are you one of them?