If you're planning on buying a home, one of the first things you'll need to do is get your credit score. This three-digit number will determine how much interest you'll pay on your mortgage and whether or not you qualify for a loan at all. There are many different types of FICO scores, but which one does a mortgage lender use? In this blog post, we'll answer that question and provide a complete guide to FICO scores and how they impact your mortgage.
Which FICO Score Do Mortgage Lenders Use Table of Contents
What is a FICO Score?
A FICO score is a number that represents your creditworthiness. It is used by lenders to determine whether you are a good candidate for a loan, and if so, what interest rate you will be offered.
There are three main components that make up your FICO score: your payment history (35%), the amount of debt you have (30%), and the length of your credit history (15%). Other factors, such as new credit applications and public records, make up the remaining 20%.
Your FICO score is important because it can affect your ability to get a mortgage, car loan, or other types of financing. It is also used by landlords to determine whether you will be approved for an apartment rental.
What Are The Different Types of FICO Scores?
There are four different types of FICO scores, which are each designed for a specific purpose. The most common type of FICO score is the one used by lenders to make credit decisions. This score is known as the "FICO Score 8" and it's the one that you're probably most familiar with.
Other types of FICO scores include the "FICO Score 8" (which is designed for use by auto lenders), the "FICO Score 6" (which is designed for use by mortgage lenders), and the "FICO Score 5" (which is designed for use by credit card issuers). Each of these scores takes into account different factors when calculating your creditworthiness.
Which FICO Score Do Mortgage Lenders Use?
So, which FICO score do mortgage lenders use? The answer is the "FICO Score 6." This score is designed specifically for use by mortgage lenders, and it takes into account factors that are important to the home-buying process. For example, the FICO Score 6 gives more weight to your payment history and credit history than other types of FICO scores.
If you're planning on buying a home, it's important to check your FICO Score 6 before you begin the application process. You can get your score from a variety of sources, including credit monitoring services like Experian and Equifax.
Once you have your score, you can start shopping for a mortgage lender. Be sure to compare interest rates and loan terms before choosing a lender.
How Do I Improve My FICO Score?
If you're looking to improve your FICO score, there are a few things you can do. One is to make sure you keep updated on your credit report - this way, you can identify any potential errors and have them fixed as soon as possible.
Additionally, try to keep your credit utilization low by using only a small portion of your available credit; this will show lenders that you're a responsible borrower.
Finally, don't open any new lines of credit unnecessarily, as this can also negatively impact your score. By following these steps, you can help improve your FICO score and in turn increase your chances of being approved for a mortgage loan.
Do Mortgage Lenders Use All Three FICO Scores?
No, mortgage lenders do not use all three FICO scores. They will only look at the "FICO Score 6" when making their decision. This is because the other two scores - the "FICO Score 8" and the "FICO Score 5" - are not designed specifically for use by mortgage lenders.
If you're hoping to get a mortgage, focus on your FICO Score 61 and take steps to improve it before you apply. By doing so, you can increase your chances of being approved for a loan with favorable terms.
What Is the Difference Between FICO 8 and FICO 9?
The two most popular FICO scores are FICO Score eight and FICO Score nine. So which one do mortgage lenders actually use? The answer is: it depends.
FICO Score eight is the most widely used credit score, but some lenders have started to switch over to FICO Score nine. There are a few reasons for this:
- FICO Score nine includes more recent data than FICO Score eight, which can be helpful in predicting risk.
- FICO Score nine also ignores paid collections accounts, which can help borrowers with a history of debt problems get approved for a mortgage.
What Lenders Use FICO 8?
FICO® Score 8 is the credit scoring model used by 90% of top lenders, and FICO® Score7 is the most common credit score. However, which FICO® scores do mortgage lenders actually use? Here's a complete guide to help you understand.
First, some basics on credit scores: A credit score is a three-digit number that represents your creditworthiness at a given point in time. It is based on your credit history, which includes things like your payment history, debt levels, and more.
The higher your score, the better your chances of getting approved for a loan or line of credit. And the better your interest rate will be. On the other hand, if you have a lower score, you may still be able to get a loan, but you'll likely pay a higher interest rate.
Now that we've got that out of the way, let's talk about which FICO® scores mortgage lenders actually use.
There are four main types of FICO® scores: Base FICO® Scores, Industry-Specific FICO® Scores, Customized or Personalized FICO® Scores, and NextGen or UltraFICO score.
Base FICO® Scores are the most commonly used type of credit score. They're used in about 90% of lending decisions. The three Base FICO® Score models are:
- FICO Score 8 -the original credit score model, which is used in about 80% of lending decisions
- FICO® Score 9 -the updated credit score model, which is used in about 20% of lending decisions
- FICO® Score 10 - the latest credit score model, which is used in a small number of lending decisions
Industry-Specific FICO® Scores are just what they sound like: scores that are tailored to a specific industry. For example, there's a FICO® Auto Score☉ that's used by auto lenders to help them make lending decisions. There are also scores for things like credit cards and insurance.
Customized or Personalized FICO® Scores are created by lenders themselves. They're based on the information in a consumer's credit report, but they can also take into account other factors, like employment history or income.
NextGen or UltraFICO® scores are the newest type of credit score on the market. They're designed to supplement traditional FICO® scores by taking into account things like savings accounts and utility payments.
So which of these scores do mortgage lenders actually use? The answer is: it depends.
Some lenders still use the original FICO® Score☉ model, while others have switched to the updated FICO® Score☉ model. And some lenders are using NextGen or UltraFICO® scores in addition to traditional FICO® scores.
The best way to find out which score a lender is using is to ask them. And the best way to get a good interest rate is to shop around and compare offers from multiple lenders.
Which Credit Bureau Is Most Used for Mortgages?
The credit bureau that is most often used for mortgages is Experian. However, all three credit bureaus (Experian, TransUnion, and Equifax) are required to provide information to mortgage lenders. This means that a lender may use any or all of these bureaus when considering your application.
What Is the Minimum FICO Score for a Mortgage?
The minimum FICO score for a conventional mortgage is 620, but some lenders may require a higher score.
Keep in mind that your credit score is just one factor among many that lenders will consider when determining whether to approve you for a mortgage. Other factors include your employment history, income, and debts.
What Is the Average FICO Score for a Mortgage?
The average FICO score for a conventional mortgage is 700. For an FHA loan, it's 680. And for a VA loan, it's 720.
Remember that these are averages, which means that some people will be approved with lower scores and some will need higher scores. The best way to know which score you'll need is to talk to a lender about your specific situation.
If you're thinking of applying for a mortgage, be sure to check your credit report and FICO score ahead of time so you can see where you stand.
What Credit Score Do You Need for a Mortgage UK?
The answer to this question is not as straightforward as you might think. In the UK, there are three different credit scoring agencies which lenders use: Experian, Equifax and CallCredit.
All of these agencies will have slightly different scores for you, which is why it's important to check all three of your scores before applying for a mortgage.
Lenders will typically use the middle score from the three agencies when considering your mortgage application.
So, if your Experian score is 650, your Equifax score is 700 and your CallCredit score is 720, the lender will use the 700 score in their decision-making process.
It's also important to remember that each lender has their own criteria for what they consider to be a 'good' credit score. So, even if your score is within the acceptable range for one lender, that doesn't mean it will be for another.