Which Credit Bureau Is Used for Mortgages?

Understanding how credit reports and scores function is an important step for individuals considering homeownership. The information contained within credit files directly influences a lender’s decision regarding loan approval and the terms offered.

The Major Credit Reporting Agencies

Three primary credit reporting agencies collect and maintain consumer credit data: Experian, Equifax, and TransUnion. They gather financial information from various creditors, including banks, credit card companies, and auto lenders, as well as public records like bankruptcies. This collected data forms the basis of an individual’s credit report, which summarizes their borrowing and repayment history.

Each agency compiles its own credit report for consumers. While they collect similar types of information, their reports may not always be identical. This can occur because creditors might report to only one or two of the agencies, or they may report information at different times.

Credit Scores Used for Mortgages

While many consumers are familiar with general-purpose credit scores like the common FICO Score 8 or VantageScore, mortgage lenders often use specific, older versions of FICO scores. These industry-specific scores are tailored for mortgage lending and are often referred to as “Classic FICO” versions.

Specifically, mortgage lenders typically rely on FICO Score 2 from Experian, FICO Score 4 from TransUnion, and FICO Score 5 from Equifax. These scores represent an assessment of a borrower’s creditworthiness and range from 300 to 850, with higher scores indicating lower risk to lenders. The interest rate and terms offered on a mortgage are significantly influenced by these scores.

Mortgage Lender Credit Evaluation

Mortgage lenders typically obtain a “tri-merge” credit report when evaluating an application. This report combines credit information and scores from Experian, Equifax, and TransUnion. Reviewing data from all three sources provides lenders a comprehensive view of an applicant’s credit history and allows cross-verification.

When a lender receives three different FICO scores for a single applicant, they generally use the “middle score” for qualification purposes. For example, if an applicant has scores of 720, 730, and 740, the lender would use the 730 score to assess eligibility and determine the interest rate.

If two individuals are applying for a mortgage, lenders typically use the lower of the two middle scores. Beyond just the numerical score, lenders also scrutinize the underlying credit report for specific factors such as payment history, the amount of debt relative to income, and the types of credit accounts maintained.

Accessing Your Credit Information

Individuals have the right to access their credit information to ensure accuracy. Consumers are entitled to a free credit report from each of the three major credit bureaus—Experian, Equifax, and TransUnion—once every 12 months. This can be obtained through AnnualCreditReport.com.

It is advisable to review these reports before applying for a mortgage. Checking the reports allows individuals to identify any errors that could negatively impact their credit scores. Addressing such discrepancies proactively can help ensure the credit information lenders review is accurate, potentially leading to more favorable loan terms.