Which FICO Score do Mortgage Lenders Use?

You know lenders check your credit to determine your ability to secure a mortgage, but which FICO score do they use? There are many variations that might make you wonder just what lenders will look at when you apply for a mortgage.

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Looking at the basics, most consumers have credit scores from three credit bureaus – Equifax, Trans Union, and Experian. Each bureau receives the same information, or at least close to it, but typically, consumers find differences from bureau to bureau.

What does this mean for you? In all honesty, it could mean three different credit scores. So how do you know which one is used? We help you understand the process below.

The Most Used Score

The actual FICO score a lender uses may vary by lender. As a general rule, though, lenders take the middle score of the three reported FICO scores. First, though, you must understand that the lender will make sure your scores are ‘complete.’ In other words, do you have enough trade lines reporting to create a credit score? Is the information accurate? Once the lender determines these answers, they look at all three scores and use the following principles:

  • If you have three scores, they will take the middle score for qualification purposes. For example, a borrower with a 680, 695, and 650 score will have a 680 score for qualifying purposes. Even though he has a 695 credit score, which might get him a better interest rate or fewer fees, that 680 is the score lenders will use.
  • If a borrower has two scores for some reason, the lender will use the lesser of the two scores. For example, if a borrower has a 690 and a 670, the lender will use the 670 for qualification purposes.
  • If a borrower has three scores, but one score repeats between two bureaus, that is the chosen score. In this case, they don’t look for the middle or lowest score – they use the repeated score for qualification purposes.

Comparing The Scores of Joint Applicants

Now, if you apply for a mortgage with another applicant, you are prone to different rules. The lender will still look for the middle score for each borrower. But they take it one-step further. The lender will then use the lowest middle score between the two borrowers for qualifying.

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For example, you have credit scores of 695, 700, and 705. Your spouse has credit scores of 660, 670, and 675. The lender will use your spouse’s middle score of 670 for qualifying purposes, even though your middle score is 700.

This is why it’s important to determine if you and your spouse should both go on the loan. Do you need your spouse’s income to qualify for the loan? If you don’t make enough money to keep your debt ratio down, you may need your spouse’s income. If you put your spouse on the loan, though, you will need to consider his/her credit score and debts to make sure that he/she increases your chances of approval rather than ruins them.

Why Lenders Care About Your FICO Score

You might wonder why your FICO score carries such weight with lenders. First, it shows them your risk level. A good credit score shows lenders that you are financially responsible. A low credit score may alert a lender that you are a risky borrower. They will then dig further into your credit history to see what made the score low.

Lenders use your credit score in a few ways:

  • To determine if you are eligible for a loan program
  • To determine which interest rate to charge (lower credit scores often mean higher rates)
  • To determine what closing fees to charge (lower scores often mean higher closing costs)

Your FICO score plays an important role in your loan approval. Even if you get approved, it will determine how much documentation a lender wants from you as well as what they will charge you. Keeping your credit score as high as possible will increase your chances of approval and of getting the best loan possible.

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