What is a Credit Score?
A credit score is a numerical representation of your creditworthiness, based on your credit history. Scores typically range from 300 to 850, with higher scores indicating better creditworthiness. These scores help lenders assess the risk of lending you money.
Major Credit Scoring Models
Two primary credit scoring models are used:
- FICO Score: Created by the Fair Isaac Corporation, this is the most widely used credit score in the United States.
- VantageScore: Developed by the three major credit bureaus (Equifax, Experian, and TransUnion).
Which Credit Score Do Mortgage Lenders Use?
Mortgage lenders predominantly use specific versions of the FICO score, known as the "classic" or "legacy" scores:
- Experian: FICO Score 2
- TransUnion: FICO Score 4
- Equifax: FICO Score 5
Why Older FICO Versions?
Fannie Mae and Freddie Mac require these specific versions for conforming loans, as they've proven to be reliable predictors of mortgage default risk.
"Many consumers are surprised to learn their mortgage credit score often differs from the score they see on credit monitoring sites." - John Hope Bryant, Operation HOPE founder
Minimum Score Requirements
Different mortgage types have varying requirements:
| Mortgage Type | Minimum Score | Typical Score |
|---|---|---|
| Conventional | 620 | 680+ |
| FHA | 580 | 620+ |
| VA | No minimum | 620+ |
| Jumbo | 680 | 700+ |
Factors Affecting Credit Scores
- Payment history (35% of total score)
- Credit utilization (30%)
- Length of credit history (15%)
- Credit mix (10%)
- New credit (10%)
How to Check Your Mortgage Credit Scores
To view the scores lenders will likely use:
- Request a free credit report from each bureau through AnnualCreditReport.com
- Purchase FICO scores directly from myFICO
Improving Your Credit Score
Short-term Strategies
- Avoid applying for new credit
- Pay down credit card balances
- Dispute any errors on credit reports
- Keep old accounts open
Long-term Strategies
- Make all payments on time
- Maintain low credit utilization
- Build a diverse credit mix
- Monitor your credit regularly
Beyond the Score
Lenders also consider:
- Debt-to-income ratio
- Employment history
- Down payment amount
- Asset reserves
- Property appraisal
Special Considerations
Non-traditional Credit
Some lenders may consider alternative credit data:
- Rent payments
- Utility bills
- Insurance payments
- Cell phone bills
The Future of Mortgage Credit Scoring
The industry is evolving with potential changes including:
- Adoption of newer scoring models
- Integration of alternative data
- Enhanced automated underwriting systems
- Greater emphasis on rental payment history
For more detailed guidance on mortgage approval and credit scores, visit the Federal Trade Commission (FTC) website or consult with a mortgage professional.