Oh Experian…. It’s about more than your FICO

Have great credityou seen the Experian commercials about how a person’s great credit score virtually guarantees a low interest rate and/or line of credit? A good credit score is important. That is true. The higher the score, the greater the odds of getting a lower interest rate on loans or revolving credit lines.

What irks me about these commercials is a great credit score is not a guarantee of anything as Experian suggests; especially when it comes to qualifying for a mortgage. Credit is only one of the determining factors in obtaining a mortgage. Other factors include income and job longevity, the amount of debt a person carries, outstanding liens/judgments that may be looming out there, savings, a previous bankruptcy or foreclosure.

A person could have great credit but no money saved to afford the costs associated with securing a mortgage or meet a possible requirement for reserves (additional savings cushion in the event of emergency). A person with great credit could have started a new job in a different field of work than previously held or may be collecting unemployment benefits. Lenders typically like to see at least 2 years employment with the same company or within the same field of work.

Someone with great credit may be carrying a little more debt than they should per lender requirements or have a recent bankruptcy that hasn’t been discharged long enough to be able to qualify for a mortgage. Re-building credit after a bankruptcy or foreclosure does not take as long as someone may think…..However, lenders require certain time pass after a bankruptcy is discharged or a foreclosure date has passed before approving a new mortgage. These time frames can vary based on the loan product being offered or even from lender to lender. Havimortgage approvedng an 800 credit score will not negate these waiting periods.

So yes, great credit is a good thing to have. For Experian to say “getting a mortgage shouldn’t be a problem” based on a credit score alone is spreading misinformation (which there is more than enough out there already on a plethora of subjects.) As I briefly pointed out, there is a lot more for mortgage lenders to consider, and verify, than a FICO score. Why Experian has decided to imply otherwise is beyond me….

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