Every day, we meet borrowers who have no idea how credit scores work, and believe a lot of things about their scores that are not true. So, we have put together this Credit Scores 101 series. In this article, we will go over some myths you might believe about credit scores. You can also catch up on the previous installments:

Credit Scores 101: What is Your Credit Score?

Credit Scores 101: Your Credit Reports

Credit Scores 101: How You Can Raise Your Credit Score

Credit Scores 101: Credit Scores Do’s and Don’ts, Part 1: Do’s

Credit Scores 101: Credit Scores Do’s and Don’ts, Part 1: Don’ts

Let’s get started.

Credit Score Myths

1. Ordering your free credit report shows you your score. A common misconception is that by ordering your free credit report from one of the three bureaus, you can see your score. But your report and score are two different things. The report tells you what data went into calculating your score, but not what it is. You still need to request your score, typically for a fee.
2. You have one credit score. Since we usually read and talk about “your credit score” in the singular, many believe they have a single credit score. But did you know each of us has many scores? Each of our scores are computed using different models with each of the three major credit bureaus.  For mortgage qualifying purposes, the middle (median) score is used. 
3. Using Credit Karma tells you your FICO score. Another mistake borrowers sometimes make when applying for mortgages is assuming they can use Credit Karma to check their FICO scores for free. Credit Karma can be used to look up your VantageScore consumer credit score. Your consumer credit score may differ from a score obtained by a lender for mortgage, auto or credit card purposes.
4. Paying your rent and utilities is raising your credit score. You might assume that if you are paying rent each month and keeping up with your water, power, phone and cable bills, you are actively improving your credit score. None of this data is reported to credit bureaus by default, however. Experian offers a program to report your utilities and phone bills, but you have to opt into it. Until you do, none of that information is calculated into your score. What about rent? Talk to your landlord. Find out if they do or do not report it. If not, ask if they would consider it. Until then, your rent payments will not help you build your credit up, however on time rent payments will be verified when applying for a mortgage.
5. The credit bureaus do accurate work. The entire credit economy in the US hinges on the records the three major credit bureaus maintain: Experian, Equifax, and TransUnion. Those records can be the deciding factor in whether you are able to get a house or a job. So, you would think that the bureaus would maintain extremely accurate records since so much depends on them. But mistakes in credit reports are not a rarity at all. The Consumer Finance Protection Bureau says, “According to a study conducted by the Federal Trade Commission, one in five people have an error on at least one of their credit reports.” That is why checking your score and your reports is so important. See Credit Scores 101: Your Credit Reports to learn more.
6. If you’re an adult, you have a credit score. If you are an adult with a credit card or you have borrowed money from an institution, you should have an established credit score, good or poor. But if you have never borrowed money before, you should not assume you have established credit at all. Just being an adult does not automatically confer a credit score upon you. You have to build it. And as we discussed, simply paying your rent will not do this. Ironically, even if you have significant savings and a steady income, you may encounter obstacles if you try to buy a home or take out a loan without establishing credit first. So, do not make any assumptions. Check your score before you try and move forward.

Get Real Answers About Credit Scores

Community Mortgage is here to educate you about your credit score. We can answer your questions and make sure you understand how to protect and raise your score before applying for a home loan in California. Please call (619) 692-3630 now.