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Fact vs. Fiction

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					                                 Fact Vs. Fiction
Fiction: Inquiries from multiple mortgage lenders while shopping for a loan will
lower my credit score.
Fact: Looking for a mortgage or an auto loan may cause multiple lenders to request
your credit report, even though you’re only looking for one loan. To compensate for this,
the score ignores all mortgage and auto inquiries made in the 30 days prior to scoring.
If you find a loan within 30 days, the inquiries won't affect your score while you're rate
shopping. In addition, the score looks on your credit report for auto or mortgage
inquiries older than 30 days. If it finds some, it counts all those inquiries that fall in a
typical shopping period as just one inquiry when determining your score.

Fiction: Paying old collection accounts will improve my credit score.
Fact: In most cases, paying an old collection account will not increase your credit score.
It is more likely to decrease a customer’s credit score because a collection is viewed the
same, whether it is paid or unpaid. The difference is the last activity date. The older the
date, the less impact it has on the current credit score. If old the collection is paid, the
last activity date is updated and now the account is viewed as recent and will have a
negative impact on the overall credit rating. More weight is given to the recent accounts
on the report. You should never advise customers to not pay their collection
account, just do not advise them that their credit score will improve if they pay
them.

Fiction: Credit scores can change only once per month or every 30 days.
Fact: Just the opposite is true. Each creditor reports information to each credit bureau
at different times of the month. This will cause the information and potentially the
credit scores to change on a daily basis. For example, American Express may report to
Experian on the 1st of the month, Equifax on the 15th and Transunion on the 25th.
Thorough review of the credit report is needed to determine what caused the score to
change from report to report. (It usually is not the inquiries)

Fiction: There are 6 inquiries from “Mortgage Services” on the credit report all on
the same day. Did we really pull their credit 6 times on 1 day?
Fact: No. We typically will order a tri-merged credit report for each borrower on the
loan. The bureau is required to display a “footprint” of each bureau from which credit
was requested for each borrower on the loan. So, if you have 2 borrowers on the loan,
and you order a joint or individual credit report for each, you will see 6 footprints, 3
bureaus for 2 customers. Although you will see 6 footprints, it will only register as 1
inquiry for each customer.

Fiction: The credit score on my consumer credit report should be the same as the
one the mortgage company returns.
Fact: When mortgage companies order a credit report the credit bureau will include a
“mortgage adjustment” that is factored into the customer’s credit score. These
adjustments are not controlled by the mortgage lender, but buy the credit bureaus
themselves. This adjustment takes a customer’s past mortgage history into account and
will reflect accordingly in the credit scores returned to the lender. For example, a
customer with an extensive clean history of mortgage payments will have a different
adjustment than a customer who has never had a mortgage in the past.




*Sources of Information- myFICO.com & Equifax credit service
Fiction: There is nothing a customer can do to fix errors on their credit report.
Fact: Customers who have errors on their credit report have the ability to file a dispute
with the credit bureau to correct the erroneous information. Your customer can go to
www.annualcreditreport.com and obtain a free copy of their credit report. They will need
to submit documentation supporting their claim that the information reported is
erroneous, and the credit bureau has 30 days to confirm the information and update
the repositories.

Fiction: My score will drop if I apply for new credit.
Fact: If it does, it probably won't drop much. If you apply for several credit cards within
a short period of time, multiple requests for your credit report information (called
“inquiries”) will appear on your report. Looking for new credit can equate with higher
risk, but most credit scores are not affected by multiple inquiries from auto or mortgage
lenders within a short period of time. Typically, these are treated as a single inquiry and
will have little impact on the credit score as stated above.

Fiction: A poor score will haunt me forever.
Fact: Just the opposite is true. A score is a “snapshot” of your risk at a particular point
in time. It changes as new information is added to your bank and credit bureau files.
Scores change gradually as you change the way you handle credit. For example, past
credit problems impact your score less as time passes. Lenders request a current score
when you submit a credit application, so they have the most recent information
available. Therefore by taking the time to improve their score, will put your customer is
better position to get approved for a loan.




*Sources of Information- myFICO.com & Equifax credit service

				
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