The FHFA – the federal regulator for Fannie Mae & Freddie Mac -- set out new guidelines for interest rates and one part of the change has certain consumers with lower credit scores qualifying for lower interest rates than other consumers with higher credit scores. Someone with a 640 credit score in essence will qualify for about ¼% lower in interest rate on a 30 year mortgage than someone with a 740 credit score. This is flat-out wrong! How does this happen?

For many years, Mr. Dave Ramsey, debt solutions guru, advocates a position that no consumer needs a credit score. He claims that you can purchase a house or anything else without a credit score. He basically tells his followers that a credit score is a bad thing. Since he doesn’t understand FICO® credit scores, he pushes a position that is financially illiterate.

I recently walked in another loan officer’s office when I overheard his conversation with a client he was on the phone with. He was trying to tell her how to raise her FICO® Scores. However, the information he gave was inaccurate. After he finished the call, I asked him about his incorrect credit score comments to the client. He responded, “It doesn’t matter. She won’t know the difference.” he didn't care. It was not his money at stake. This is not out of the ordinary. Loan officers too often give bad advice that end up hurting their clients. Why does this happen?

Everyone knows that interest rates are impacted by credit scores. The lower the credit score, the higher the interest rate. But hardly anyone understands the impact of a lower credit score to your home purchasing power. It is a lot more than everyone understands, and even mortgage loan officers.