Mortgage Company Has a Different Credit Score Than Credit Agencies

Reader Question:

My husband and I recently had a little "mishap" regarding our home mortgage in Dec. 08. We were affected by the hurricane in September 08 and our mortgage company agreed to help us by allowing us to not pay the mortgage until Dec., but in December the full balance owed was due. I paid the balance I thought that was owed, but was a few hundred dollars short. When we were notified, we immediately made the proper payments, but our mortgage company reported our payment as 60 days past due. This has greatly impacted our credit score. I called the mortgage company and kindly asked if they could remove that negative reporting, but they said they could not.

We are now in the process of trying to purchase a home. The mortgage company we applied to said that my husband's score was 640 and mine was 619. This shocked me so I purchased all three credit reports. My husband's combined credit score is 682 and my combined credit score is 672. He said we both needed to be at least 620 or above. Why is it that the mortgage company has a different credit score than the three credit agencies? That seems like a tremendous difference in scores!

Brandon's Response:

Wow, I'm sorry to hear about your problem. The good news is that your credit score should rebound fairly quickly, since this is an isolated incident. Your score drops the most immediately after a negative event, but the event will have less impact on your score over time.

Let's move on to talk about the core part of your question. It's possible that the mortgage lender is using their own internal credit-scoring model. Some lenders do this. The raw information still comes from your credit reports, but the lender will interpret the information in their own way. There are actually many scoring models, aside from the FICO model most people are familiar with.

The bottom line is that all mortgage companies have their own preferences when it comes to credit scores and mortgage approval. Most of them will pull all three of your scores from the reporting bureaus and use the middle number, or a combined average. Other lenders will use the lowest of all three scores -- a technique used to charge more interest. And some will even use their own scoring models to interpret the data reported from the credit bureaus.

It's starting to devolve into a credit scoring free-for-all, if you ask me, and it leads to a lot of confusion. Alas, it is what it is.

I recommend doing two things. First, I would ask the lender why their score is so much different than what the bureaus are reporting. They are the only ones who can answer this question with any certainty. Secondly, I would consider using a different lender. The company you are talking to is not the only game in town, and there may be another lender who is willing to be more flexible.