What Credit Score Do Lenders Use for Mortgage?

When applying for a mortgage, your credit score is a fundamental assessment tool for lenders. This three-digit number indicates your financial reliability and history of managing debt. Lenders use these scores to gauge the likelihood of you repaying your mortgage. A favorable credit score can lead to more advantageous loan terms and interest rates, directly impacting the cost of your home loan.

Credit Scoring Models Used in Mortgages

Mortgage lenders primarily rely on specific versions of FICO scores to evaluate applicant creditworthiness. The mortgage industry often uses older, established FICO models due to regulatory requirements. These include FICO Score 2, FICO Score 4, and FICO Score 5.

These FICO versions have remained standard for mortgage applications, even as newer models have been developed for other types of lending. Over 90% of mortgage lenders utilize FICO scores in their lending. While other scoring systems like VantageScore exist, they are not the primary scores used for mortgage lending. This consistent use of specific FICO models ensures a uniform standard across the mortgage industry.

How Mortgage Lenders Evaluate Credit Scores

Mortgage lenders obtain credit reports and scores from all three major credit bureaus: Experian, Equifax, and TransUnion. Lenders commonly receive a combined “tri-merge” report, which consolidates information from all three bureaus along with their FICO scores.

For a single applicant, lenders use the median of the three FICO scores pulled from the bureaus. For example, if scores are 765, 789, and 775, the 775 would be the score used. In joint applications with multiple borrowers, lenders consider the lower of the two median scores between the applicants.

Key Factors Influencing Your Mortgage Credit Score

Your mortgage credit score is derived from several categories of information in your credit report. Payment history holds the most weight, accounting for approximately 35% of a FICO score. Consistently making on-time payments across all credit accounts demonstrates financial reliability. Late payments, especially those 30 days or more past due, can substantially impact your score.

Amounts owed, also known as credit utilization, constitutes about 30% of the score. This factor assesses the amount of debt you carry relative to your available credit, with lower utilization viewed more favorably by lenders. The length of your credit history contributes around 15% to your score, with longer histories indicating more established credit management. This category considers the age of your oldest account, newest account, and the average age of all your accounts.

New credit inquiries and recently opened accounts make up about 10% of the score. While necessary for obtaining new credit, opening multiple accounts in a short period can signal increased risk to lenders. Finally, your credit mix, or the variety of account types you manage (such as credit cards and installment loans), accounts for the remaining 10%. Demonstrating responsible management of different credit types can positively influence your score.