Which Credit Scores Do Mortgage Lenders Use?

Understanding your credit score is an important step when preparing for a mortgage application. A credit score provides a numerical summary of your creditworthiness. For those seeking to finance a home purchase, how lenders evaluate this score significantly influences their decision-making process.

The Specific FICO Scores Mortgage Lenders Use

Mortgage lenders primarily rely on FICO scores, rather than VantageScore models. When you apply for a home loan, lenders pull credit reports and FICO scores from all three major credit bureaus: Experian, Equifax, and TransUnion. Each bureau provides a specific FICO version tailored for mortgage lending.

Mortgage lenders use FICO Score 2 from Experian, FICO Score 4 from TransUnion, and FICO Score 5 from Equifax. These are referred to as “classic” FICO scores, and they are distinct from the more widely known FICO Score 8 or 9 versions that consumers might encounter through other financial services. Lenders receive a “tri-merge” credit report.

When a single borrower applies, lenders use the “middle” score among the three FICO scores pulled. For example, if your scores are 690, 700, and 710, the lender will use 700 for their primary decision. If there are two applicants, such as a couple applying jointly, lenders use the lower of the two applicants’ middle scores.

Why Mortgage Lenders Use Specific Scores

Mortgage lenders favor these particular, older FICO score versions primarily due to historical precedent and regulatory requirements. The government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, which purchase the vast majority of conventional mortgages from lenders, mandate the use of these specific FICO models. This standardization ensures consistency and reliability in assessing risk across the mortgage market.

These classic FICO models have a track record in predicting the likelihood of default on long-term debt like mortgages. While newer FICO scores (like FICO 8 or 9) and VantageScore models exist and are used in other lending sectors, they are designed for broader consumer credit risk and incorporate different data points. The mortgage industry’s continued reliance on the older versions reflects a preference for models with established predictive accuracy for the unique characteristics of a 15-year or 30-year loan.

Impact of Your Credit Scores on Mortgage Eligibility

Your FICO scores influence both your ability to qualify for a mortgage and the terms of the loan you receive. Higher credit scores indicate a lower risk to lenders, which can lead to more favorable loan conditions. Conversely, lower scores may restrict your options or lead to less advantageous terms.

Meeting minimum score requirements is a hurdle for mortgage approval. Different loan programs, such as conventional, FHA, or VA loans, have varying minimum credit score thresholds. For example, while some FHA loans may be available with a FICO score as low as 500 with a larger down payment, a score of 580 or higher is required for a 3.5% down payment. Conventional loans require a minimum score of 620.

A strong credit score impacts the interest rate offered on your mortgage. Borrowers with higher scores are perceived as more reliable, allowing lenders to offer lower interest rates. Even a small reduction in the interest rate can result in savings over the 15-year or 30-year life of a mortgage. Beyond interest rates, credit scores can influence other loan terms, such as required down payment amounts or the need for private mortgage insurance.

How to Obtain Your Mortgage-Specific Credit Scores

Many free credit score services provided by credit card companies or financial websites offer general-purpose scores, such as FICO Score 8 or VantageScore. These scores may differ from the specific FICO versions mortgage lenders use. Consequently, the score you regularly monitor might not reflect what a mortgage lender will see.

To obtain the exact FICO Score 2 (Experian), FICO Score 4 (TransUnion), and FICO Score 5 (Equifax) that mortgage lenders use, you may need to purchase them directly. These scores are available from MyFICO.com. Some of the individual credit bureaus also offer these specific versions for consumer purchase. Reviewing these mortgage-specific scores before applying can provide a clear understanding of your standing and help anticipate the terms you might be offered.