What fico score is used for mortgages

Billions of FICO® Scores are used in credit related decisions every year. They can help you qualify for the best loan rates, terms and promotions. Understanding your FICO® Scores and what they mean to you is a critical part of your financial health.

What Your FICO® Scores Mean To You

What fico score is used for mortgages

When you apply for credit — whether for a credit card, auto loan or mortgage — lenders want to know what risk they'd take by loaning you money. To evaluate this risk, lenders will often pull a credit report and credit score.

The most widely used credit scores are FICO® Scores. In fact, FICO® Scores are used by 90% of top lenders, helping lenders make decisions about extending credit and at what terms and rates. Your FICO® Scores are based on a complex, scientific algorithmic assessment of the information in your credit report.

FICO® Scores provide an unbiased and proven way to evaluate a consumer's credit risk — helping consumers like you obtain credit more quickly and fairly.

Your Credit Decisions Have A Direct Impact On Your Scores

Your FICO® Scores are based on your credit decisions and your credit decisions only — as captured in your credit reports. Every time you open a credit card or make a car payment, you're adding to your credit history — the very history that FICO® Scores evaluate. Ultimately, it's up to you to develop healthy, responsible credit habits that will have a positive impact on your FICO® Scores.

To even receive a FICO® Score, you have to have enough recent information in your credit report. Generally, that means you must have at least one account that has been open for six months or longer and at least one account that has been reported to the credit bureaus within the last six months. Essentially, you have to be actively using your credit to receive a FICO® Score.

When a FICO® Score is generated, it's based on five key factors in your credit report.

  1. Payment history (35% of your scores):

    Whether you've paid past credit accounts on time

  2. Amounts owed (30% of your scores):

    The amount of credit and loans you are using

  3. Length of credit history (15% of your scores):

    How long you've had credit

  4. New credit (10% of your scores):

    Frequency of credit inquires and new account openings

  5. Credit mix (10% of your scores):

    The mix of your credit, retail accounts, installment loans, finance company accounts and mortgage loans

What fico score is used for mortgages

Credit bureaus, credit reports and your FICO® Scores

There are three parts to the FICO scoring process: the credit bureaus, your credit reports and your FICO® Scores . Let's start with the bureaus.

The three major credit bureaus are Equifax, Experian and TransUnion. They house your credit data. When you get a new loan, make or miss payments on loans or use a credit card, it's common for your lender to report this information to the credit bureaus. The information stored at the credit bureaus is represented in your credit reports.

Your credit reports contain information about your credit history including loans, credit cards, inquiries, payments and more. It's common for your credit reports to be slightly different at each credit bureau as lenders can report to any, all three or none of the credit bureaus.

Finally, your FICO® Scores are based on the data in your credit reports. When your lender obtains a credit report, they may also request that a FICO® Score be included to help them better understand the information in your report.

Both your credit reports and FICO® Scores can vary from bureau to bureau, and your lender may pull your report and FICO® Scores from any or all three of them.

FICO® Score Versions

People have more than one FICO® Score and each lender determines which FICO® Score version they will use when assessing your credit risk. By accessing and understanding the most commonly used FICO® Score versions, you can have a more comprehensive understanding of your credit picture.

FICO® Score versions can be broken down into two major categories: "base" FICO® Scores and industry-specific FICO® Score versions.

Base FICO® Scores are designed to predict the likelihood of not paying as agreed in the future on any credit obligation, whether it's a mortgage, credit card, student loan or other type of credit. There are multiple versions of base FICO® Scores because the FICO scoring system is periodically updated as data reporting practices, consumer credit use practices and lender credit extension practices change over time. The FICO scoring system is updated to adjust to these changes to ensure it remains a robust predictor of risk. Just like there are multiple versions of a smartphone as new features become available, there are multiple versions of FICO® Scores.

Industry-specific FICO® Scores help lenders more accurately assess the risk on a specific type of credit obligation, such as car loans or credit cards. Industry-specific FICO® Scores are grounded in the same algorithm as base FICO® Scores, but are tweaked to provide lenders a further-refined credit risk assessment tailored to the type of credit the consumer is seeking. For example, auto lenders and credit card issuers may use a FICO® Auto Score or a FICO® Bankcard Score, respectively, instead of base FICO® Scores.

It's important to understand that while each version has unique features, actions such as paying bills on time, using available credit responsibly and only opening new credit when needed can help you better manage your credit health.

Which FICO® Score Version Matters To Me?

Between all three bureaus, there are multiple FICO® Scores that are commonly used by lenders. The score version that matters most to you depends on the type of loan you're interested in, where your lender pulls your scores and what score version they use. You can use this chart as a guideline:

ExperianEquifaxTransUnionWidely used versionsFICO® Score 9FICO® Score 9FICO® Score 9FICO® Score 8FICO® Score 8FICO® Score 8Versions used in auto lendingFICO® Auto Score 9FICO® Auto Score 9FICO® Auto Score 9FICO® Auto Score 8FICO® Auto Score 8FICO® Auto Score 8FICO® Auto Score 2FICO® Auto Score 5FICO® Auto Score 4Versions used in credit card decisioningFICO® Bankcard Score 9FICO® Bankcard Score 9FICO® Bankcard Score 9FICO® Bankcard Score 8FICO® Bankcard Score 8FICO® Bankcard Score 8FICO® Score 3FICO® Bankcard Score 5FICO® Bankcard Score 4FICO® Bankcard Score 2Versions used in mortgage lendingFICO® Score 2FICO® Score 5FICO® Score 4Newly released versionFICO® Score 10FICO® Score 10FICO® Score 10FICO® Auto Score 10FICO® Auto Score 10FICO® Auto Score 10FICO® Bankcard Score 10FICO® Bankcard Score 10FICO® Bankcard Score 10FICO® Score 10TFICO® Score 10TFICO® Score 10T

What fico score is used for mortgages
Seeking an auto loan? FICO® Auto Scores are the industry-specific scores used in the majority of auto-financing credit evaluations. Your auto lender can pull your score from any or all three bureaus.

What fico score is used for mortgages
Looking for a new credit card? FICO® Bankcard Scores or FICO® Score 8 are the score versions used by many credit card issuers. Your credit card issuer can pull your score from any or all three bureaus.

What fico score is used for mortgages
Refinancing or taking on a new mortgage? FICO® Score 2, FICO® Score 4 and FICO® Score 5 are used in the majority of mortgage-related credit evaluations. Most mortgage lenders will pull your scores from all three bureaus.

For other types of credit, such as personal loans, student loans and retail credit, you'll likely want to know your FICO® Score 8, the score most widely used by lenders.

The newest version, FICO Score 10 relies on the same design and key ingredients of prior models as well as captures the subtle shifts in consumer credit data that have occurred over the 5+ years since FICO Score 9 launched, such as the increasing use of personal loans, especially for purposes of debt consolidation. As long as consumers practice good habits like consistently paying bills on time, lowering their debt as much as possible, and applying for credit only when needed, they can achieve and maintain a good FICO Score 10.

FICO Score 10 T builds on FICO Score 10 by also assessing "trended credit bureau data" when determining your score. Scores that don't use trended data typically use the most recently reported month of data to drive certain components of the score such as the most recently reported balance and/or credit limit on an account.

By contrast, with FICO Score 10 T the "trended data" considers a longer historical time frame (the previous 24 months or longer) of the balance and/or credit limit to get a more refined view of your credit risk. The trended data allows the credit scoring model to determine what your "trend" is: are your balances trending up, down, or staying the same? Someone whose balances are trending up may be higher risk than someone whose balances are trending down or staying the same.

FICO Score 10 and FICO Score 10 T are currently available to lenders.

Managing Your Credit And FICO® Scores Responsibly

Higher FICO® Scores are a result of healthy credit behaviors, and the best way to have higher FICO® Scores is to demonstrate healthy credit behaviors over time. Here are a few tips you can follow.

  • What fico score is used for mortgages

    Pay your bills on time. Delinquent payments and collections can have a major negative impact on your FICO® Scores. If you're behind on payments, get current and stay current.

  • What fico score is used for mortgages

    Avoid having payments go to collections. Paying off a collection account will not remove it from your credit report. It will stay on your report for seven years.

  • What fico score is used for mortgages

    Keep balances low on credit cards and other "revolving credit". It's okay to use your credit cards, just be careful about using a large percentage of your available credit — high utilization rates can have a major impact on your FICO® Scores.

  • What fico score is used for mortgages

    Don't close unused credit cards in an attempt to raise your scores. Your FICO® Scores consider the age of your accounts — the longer your credit history, the better.

  • What fico score is used for mortgages

    Do your rate shopping for a given loan within a short period of time. FICO® Scores distinguish between a search for a single loan and a search for a mortgage, student or auto loan, in part by the length of time over which inquiries occur.

  • What fico score is used for mortgages

    Have credit but manage it responsibly. Ultimately, having a mixture of credit is a good thing — as long as you make your payments regularly and on time. Someone with no credit cards tends to be higher risk than someone who has managed credit cards responsibly.

  • What fico score is used for mortgages

    Checking your own credit reports and FICO® Scores will not lower your scores.

FICO® Score Myths — Debunked

What fico score is used for mortgages

Myth: A poor score will stay poor forever

FACT

FICO® Scores are based on a snapshot of credit behavior. As behavior changes, so will that snapshot. Healthy credit decisions, such as paying bills as agreed and waiting for negative items to "age", will cause scores to improve over time.

What fico score is used for mortgages

Myth: Checking my own FICO® Scores will lower my scores

FACT

Checking your own scores will never impact your scores.

What fico score is used for mortgages

Myth: I have to have a large income to have high FICO® Scores

FACT

Your income does not factor into your FICO® Scores.

What fico score is used for mortgages

Myth: A generic credit score is the same thing as a FICO® Score

FACT

Not all credit scores are FICO® Scores. FICO® Scores are used by 90% of top lenders.

What fico score is used for mortgages

Myth: My FICO® Score isn't important

FACT

When you apply for new credit or a new loan, your FICO® Scores may impact your ability to get the best rates, terms and promotions. In fact, high FICO® Scores could save you thousands of dollars.

Is FICO 8 or 9 used for mortgage?

The scoring model used in mortgage applications While the FICO® 8 model is the most widely used scoring model for general lending decisions, banks use the following FICO scores when you apply for a mortgage: FICO® Score 2 (Experian) FICO® Score 5 (Equifax) FICO® Score 4 (TransUnion)

Do auto lenders use FICO score 8 or 2?

Most auto lenders use FICO Auto Score 8, as the most widespread, or FICO Auto Score 9. It's the most recent and used by all three bureaus. FICO Auto Score ranges from 250 to 900, meaning your FICO score will differ from your FICO Auto Score.

What is the best FICO score to buy a house?

A conventional loan requires a credit score of at least 620, but it's ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.

What is the lowest FICO score for a mortgage?

The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable rate mortgages (ARMs).