What Credit Score Do Mortgage Companies Use?

| Tedis Baboumian |

There are a lot of things to think about when you’re looking to buy a house. An important consideration is how and where you’ll obtain financing. Your credit score is a primary factor in obtaining any kind of credit. When you start to look into mortgage financing, you may wonder, “What credit score do mortgage companies use?”

Many Different Credit Scores

Each of the three main credit bureaus determines your credit score based on information that’s reported to them by your creditors and compiled on your credit report. Since creditors are not required to report to all three bureaus, the information each credit report lists may be slightly different, which results in different credit scores. Each of your scores can fluctuate during the month based on when your creditors report to the credit bureau.

Mortgage Lending

The scores you’re familiar with probably aren’t the ones a mortgage lender looks at. The two main scoring models are provided by FICO and Vantage, and each of these companies has multiple versions of scores that may be used for different purposes. The type of FICO score mortgage companies request is typically an older version of credit scores because of guidelines set by Freddie Mac and Fannie Mae, the government-backed mortgage companies.

The scores lending companies are likely to use are:

  • Beacon 5 (Equifax FICO 5)
  • TransUnion FICO 4
  • FICO 2, also called Experian/Fair Isaac Risk Model version 2

Mortgage lenders usually request a report that contains information from all three credit bureaus. While different lenders have different criteria for determining whether to approve a mortgage application, many mortgage lenders use the middle of your different credit scores when making decisions. This means if the lowest score they’ll consider is 620, out of three credit scores, your middle score needs to be no lower than 620.

Other Considerations

Even though it’s important, your credit score isn’t the only factor mortgage lenders consider. If there’s a co-borrower, their credit history and credit scores are considered as well. Lenders also look at your employment history and how much money you plan to use as a down payment. They’ll review a variety of documents such as tax returns, pay stubs, and your debt-to-income ratio.

Improving Your Credit Score

The decision to buy a house isn’t something you can be impulsive about. Spend time saving for a down payment and work on bringing your credit score up before applying. Pay down as much debt as you can and make sure you always pay your bills on or before due dates. Avoid applying for any other new credit when you’re getting ready to apply for a home loan.

Review Your Credit Reports

An important step to take before applying for a mortgage is to request a copy of all three of your credit reports either through their individual websites or through AnnualCreditReport.com. Make sure that the information included in each report is accurate. Your credit score can be negatively impacted by inaccurate information, so it’s imperative that you dispute any errors that you find.

Dovly is an AI credit engine that can help you dispute any errors you find on your credit report. Try it risk-free with our free membership tier. Get in touch with Dovly today.

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