When you’re searching for mortgage loans, one of the most important single factors in your search will be your credit score. This score in large part dictates the kind of mortgage rates you can get, and also has a huge effect on the loan programs you’ll qualify for.
At Primary Residential Mortgage, we have loan options for people with a varying range of credit scores. Did you know that a recent change took place in the way credit score is calculated, a change that may have caused an increase in your score? Let’s look at what this change was and whether it affected you.
The three major credit reporting bureaus involved in credit score calculation, Experian, Equifax and TransUnion, announced a big change that took effect on April 16, 2018. This change signaled that these bureaus would no longer include former or present tax liens on credit reports.
The update was a result of a study that revealed high rates of incorrect reporting information based on these liens. Many consumers would have seen these changes take effect in summer 2017, when many of the updates were made, but some others may not have seen them until more recently.
It’s estimated by LexisNexis Risk Solutions that only about 11 percent of consumers will have seen a change to their score based on these changes. The changes to scores could result in increases of up to 30 points, with almost no possibility for a score to drop. It’s possible you saw this increase last year, or it may have only been within the last few months – if you’ve had liens in your history, check your score to see if it went up.
Varying by loan type, every mortgage loan program comes with minimum thresholds for credit score to allow you to qualify. Previous negative events in your history may limit the kinds of loans you can qualify for, or may cause you to pay a higher interest rate.