Credit Karma
There is a lot of confusion about why a lender's credit score is different than credit karma or any other consumer website that offers a credit score. The simple answer is there are different types of credit score models. The consumer websites do not use the same credit scores or credit score models as lenders. It's that easy. However, the data on consumer credit websites are traditionally accurate.
Hard Credit Pull verse Soft Credit Pull
There are two types of credit checks, a hard pull and a soft pull. A hard pull on your credit does lower your credit score. A soft pull does not affect your score. Mortgage lenders have the option to do a soft credit pull instead of a hard hit. Be smart, just ask for a smart pull or maybe look at another lender. Always limit your credit checks!
Major Credit Event
We are going to define major credit events as Chapter 7 bankruptcy, Chapter 13 Bankruptcy, foreclosure, short sale, or deed-in-lieu of foreclosure, Here are the basic waiting periods before you can qualify for a mortgage.
Foreclosure
Conventional 7 years
FHA 3 years
VA 2 years
USDA 3 years
Short Sale/Deed In Lieu
Conventional 4 years
FHA 3 years
VA Varies
USDA 3 years
Chapter 7 BK
Conventional 4 years
FHA 2 years
VA 2 years
USDA 3 years
Ch 13 BK
Conventional 2 years discharge
FHA 1 year of on-time payments to the bankruptcy trustee
VA 1 year
USDA 1 year
Credit Collections
Collections lower your credit score but they aren't always an issue when obtaining a mortgage. For example, a medical collection will count against your score but a lender will not typically factor that into your monthly debt. A non-medical collection of course counts against your credit and a lender will typically estimate 5% of the balance as payment and count that against your monthly bills and buying power. Short answer, lenders typically ask you to pay off collections when they are trying to get your credit score up. If your score is fine they might not ask you to do anything with it.
Credit Disputes
Disputing items on your credit report may seem like a good idea but it also tells the lender your current credit score is not accurate because the report is in dispute. Lenders may have an issue with this. If possible you should not have any open or unresolved disputes on your credit when applying for a mortgage.
Will disputing a credit item hurt my credit score? Here is the simplified answer found on google.
No, The act of disputing items on your credit report does not hurt your score. However, the outcome of the dispute could cause your score to adjust. If the “negative” item is verified to be correct, your score might take a dip.
This is why disputes are an issue. Lenders want an accurate credit report and credit score.
