Why do lenders choose your “Middle” credit scORE?

The patron saint of Ireland, St Patrick, is said to have used the shamrock, a three-leaved young sprig of clover, to explain the concept of the Christian "Holy Trinity" to the (then) pagan Irish.

The shamrock is also useful in understanding how your credit score works. Your credit “score” is actually a “trio” or "trinity" of credit scores, reported by a trio of credit bureaus; Transunion, Equifax and Experian. (It's a little-known fact that one of those bureaus, Experian, is actually an Irish Company, headquartered in Dublin, Ireland.)

Each of the three "leaves" of your credit score is different. It is unusual for even two of your three credit scores to be the same number and very rarely are all three of those numbers the same. This is because not all creditors report to all three of the bureaus (so the data on each score can vary), and additionally,  each of the three bureaus uses their own unique formula, or algorithm, to calculate their version of your  credit score. When it comes to applying for a mortgage financing, the leaf of your credit score which is most important is the middle one. Lending institutions throw out your high score and your low score and focus on the one in the middle. This mid-score is the primary factor in determining whether you obtain financing for a new home or not.

Why do lenders single out the middle score? You would think that all three credit scores, even if different, would be very close to each other. Guess what? They're not! It is not uncommon for us to see credit reports with huge differences in the scores that are reported by the three credit bureaus; sometimes the differences are as high as 75 to 80 points! As mentioned above, it is also not uncommon for us to see derogatory items on a credit report (like a collection or charged off account)  being reported by one of the credit bureaus, but not the other two.

Mortgage lenders are aware that the information that is being reported by the bureaus contains inaccuracies and deficiencies. By using the middle score, they get rid of the report (the high score) that has likely missed something which could be negatively impacting your credit, and they get rid of the report (the low score) which has likely included a negative item that is inaccurate or doesn't belong to you.

Sad, but true. They don't use a credit score average or a credit score “mean” to determine your true credit score, because throwing out the high score and the low score provides a method for weeding out inaccurate information -- inaccurate information on the one hand that may boost your score, and inaccurate information on the other hand that may depress your score. Seems like a lot of "blarney" doesn't it?!

So, it’s important that you look at all three of your credit scores when you are preparing to have your credit score “mortgage ready.” If you only have one of your scores, you have no idea if it is your middle score. Even with two of your three credit scores in hand, the one that is your “middle score” may very well be the one that you are missing.