We have things in life we do not like doing, but we must. For some, it’s eating our veggies and for others, it’s going to the doctor. When you’re getting a loan, doing a credit pull is on top of most people’s “dislike” lists.
From the many calls we get per day for new loans at our office, we have at least one person hang up because we tell them a credit pull is necessary. The disputes we get in return are that they know their credit scores from sites like CreditKarma, or they think it’s going to be a scenario like the funny Experian commercials where the consumer knows their score through one bureau and uses it for the red carpet treatment.
The fact is, while these sites can be helpful info for consumers to know what their credit looks like, a credit pull will always be necessary if you want to borrow a large amount of money. Just so you don’t think we’re picking on you, here are the reasons why it’s a necessary evil:
- Credit pulls are about more than those ominous three numbers. A credit report will detail any accounts you have been delinquent on, for what time period, and how often. This is helpful information to evaluate if you are a proper candidate for a mortgage or other big bills like a car loan.
- The credit report will verify other information that is helpful to us, and you! One of the biggest factors is verifying your recent resident history. It will also show if you are available for something called Rapid Rescore, which is a potential quick fix for client’s credit scores. Feel free to ask our reps if you are eligible for it!
- The credit report is a great tool for improvement. If you are paying for a credit pull, which many, if not all, mortgage companies will require, you will get a copy of your credit report in the mail. This report will show you your three bureaus scores (Experian, Equifax & Transunion) as well as your FICO score, which is what is regarded most when you are trying to get a home. It will display if there are any delinquent accounts you know you paid off that are still showing on your report – this will help you dispute and remove these marks from all three bureaus. You also will see if you have been a victim of identity fraud or a company’s error in giving you a delinquent account when you have proof that it was not your responsibility.
- Ask if your credit pull fee can be refunded at closing. At our office, we give the credit pull fee back to the client once they close escrow with us. We return the fee as earnest money to serious buyers because if the client is not ready to buy yet due to their score and any derogatory marks, they are basically paying for their own credit pull.
- Use those free resource sites to get an idea of what your credit scores are. Take the scores from the three bureaus and look at the mid-score, which will provide a good idea of what your FICO score may be. Ask the lender what their required minimum score is and if your mid-score falls short, you may know this is not the right time to apply. Just remember, those sites are not on-the-nose accurate, and a proper lender will not use that information to provide you a loan. An official credit inquiry must be made.
- If you have no credit scores, take up one to two new lines of credit, wait a short period of time, then apply for a home loan. Use it for small expenses you have every week anyway, such as groceries, gas, public transit, or visits to a coffee shop. Don’t use it for luxury items you never would have bought in the first place. If it’s something you would have paid in cash for, use your new credit card for it. You will build a credit history, and if you pick the right card, you can gain consumer rewards for on time payments like air mile points or cash back. Remember that a line of credit is not free money – it allows you to pay for items when you do not otherwise have the cash on you right now but know you can pay back in a month or less.