Many people seem very concerned how many times their credit bureaus are pulled. What those people don’t realize is that how many times a credit bureau is pulled is only 10% of how a credit score is determined. 35% of a score is based on payment history. 30% is based on how much is owed compared to what the limit is and 15% is based on the length of credit history or how long credit has been carried for. So wouldn’t it make more sense to pay more attention to when credit is paid or how much is owed vs limit then if credit is pulled an extra time when between these two items this is 65% of a credit score weight?
Credit has gotten much more complicated when looking at purchasing a house than in the past. There is the FICO score that lenders use as a basis to whether they are going to lend out further credit. The FICO score was developed by the Fair, Isaac & Company in 1989 summarizing a person’s credit report on how they managed their debt and their history of using credit. This is determined by the formula above. These score range from 300-850. An ok score for best rates is anything above 640, however, ideally, a score above 680 or higher is preferred. Then there is the bankruptcy navigation index, the CRP score and the ERS score. The bankruptcy navigation index determines the likely hood of a client going bankrupt within the next 24 months. The lower score the more likely a lender will see a bankruptcy from them in this time period. The CRP score is able to identify high-risk customers. It takes into account the age of the file, the length of each credit item and the history behind how someone is paying. The ERS score is the Equifax Risk Score that predicts the likely hood of a customer paying late on their accounts over 90 days within the next 12 months. The lower the ERS score the more likely it is that the client could start making late payments. This is the score most people get when a credit bureau is requested and can be the reason how come the credit score is different then what the lender or Mortgage Broker pulls.
Also, what people don’t realize is that when a lender or Mortgage Associate pulls credit that person is paying attention to who else has been pulling that credit bureau and not just the credit scores. The credit score can be excellent but if the last company to pull the credit bureau was a bankruptcy trustee or a credit counselling service instantly there will be questions. Why is this company pulling credit? What is the person’s involvement with this company? How come this person thinks that this company is needed? Mortgage Broker’s need to know this because that is what the lenders are going to be asking also.
Mortgage Broker’s & lender’s also look line by line at credit history. Are there any late payments showing up in the last six to seven years? How long was the late run for? Did the late payments get cleaned up quickly? How often are the late payments happening? Is this a habit or an incident? Then we will ask the client for details on what was going on to create the late payment history. If an item went from a late payment to a collection there are even more questions and is there a plan to clean up the collections?
Credit bureaus tell a story and it is a story that can range over the last 6 to 7 years or longer if collections or bankruptcies are involved. It is much more than one score and tells a range of information. How many times a bureau is pulled is not the biggest items anyone is looking for. Making payments on time and keeping balances low needs to be the first concern of anyone trying to keep credit bureaus in good standing.
Denise (Amber) Moser
Licensed Mortgage Professional
Dominion Lending Centres Calgary
Ph: (403) 874-5340
Fax: (403) 278-9396