Credit Score vs. Credit Report: What your clients need to know about the difference
The terms ‘credit score’ and ‘credit report’ are often used when discussing mortgages with clients. In many cases, they are thought to be one in the same by clients; however there are several differences that should be discussed. Both credit reports and credit scores are used to determine eligibility for a mortgage, but they both have significance in themselves.
A credit report is a record of a person’s credit history over the years. It is calculated by three different reporting bureaus: Equifax, Experian and TransUnion. Therefore, each client can have three different credit reports depending on the information each bureau has at the time of calculation.
So what is a credit score, your client may ask? It is an algorithm found by using information from a credit report to determine a client’s credit risk. For example, payment history, amounts owed, length of credit history, new credit, and mix of credit may all be used to determine the score. Being that there could be three separate credit reports from which information can be pulled, an average credit score is found by pulling info from each report.
A credit report is a more detailed document; it used to find any red flags that might indicate a client might not be a good candidate for a loan. The credit score is used more to determine the type of loan and parameters that must be met by a client who will be paying back the loan. For example, even if a client’s credit report shows an excellent payment history, his credit score could indicate that he may not be offered a low interest loan.
Discuss both credit reports and credit scores with your clients to make sure they understand the significance of each. At Equity National, we are here to help. If you need any assistance give us a call at 800-237-8489.
By: Equity National March 9, 2015 Uncategorized