Lender Wants Me to Buy Down Interest Because of My Credit Score

Reader Question: "I am in the process of buying a house and my credit report in August 2008 was Equifax 718, TransUnion 732, and Experian 744. My mortgage broker told me I could get the loan for 5% after buying down .25% interest. Then she ran another credit report in January 2009. My credit came back Equifax 721, TransUnion 737, and Experian 722. Now she claims that because of the credit report, I need to pay down another .25% to get to 5% because of my credit report. I realize this is still a great rate, but I don't understand why it changed. What do you think?"

I think it may have more to do with the lender than your credit score. Your score does not magically alter the approval process for the lender. They look at your score, and they then decide what they are willing to offer you. But they do this internally, based on their own business model and lending practices.

I don't know enough about this scenario, but based on what you've said it sounds like an old-fashioned "we want more money" situation to me. Maybe the lender is just trying to generate more up-front revenue from the deal. Or maybe your score truly has slipped below a certain criterion they've established.

It also depends on which of your scores they are looking at. Are they taking the middle score, the average of all three, or some other variation. For example, if they're only looking at the Experian number (which is common), then they are seeing a 22 point drop. That might be the reason for their different offer.

Out of curiosity, I sent your question to somebody else who has worked in the finance industry for many years. Here is her response:

"Well, the minimum scores have changed and the fees have increased. I would say now that they know that their scores are, they should shop around to see if there is a better deal out there. Brokers are not always the best option -- they get paid through some part of the deal."

Hope that helps.