Which FICO Scores Do Mortgage Lenders Use?

With dozens of variations of FICO credit scores, which FICO scores do mortgage lenders use? We have the answer, along with how to check your credit score.

Which FICO Scores Do Mortgage Lenders Use

As I’ve mentioned before, I’ve been on a refinancing binge. My wife and I have refinanced our home twice in the last 12 months, and my business partner and I are doing the same with three rental properties. With mortgage rates at an all time low, these deals were just too good to pass up. And this got me to thinking–which credit scores do mortgage lenders use to qualify people for a mortgage?

It’s an important question, as your credit score determines your mortgage rates or if you even qualify for a loan. While it’s common knowledge that mortgage lenders use FICO scores, most people with a credit history have three FICO scores, one from each of the three national credit bureaus (Experian, Equifax, and TransUnion). Do lenders average the three scores, or take some other approach? And what happens when two people buy a home together? Do lenders average their scores together?

So I did some research on the following questions:

  • Which FICO formula (there’s more than one, unfortunately) do mortgage companies use?
  • For a single applicant, which of up to three FICO scores will be considered?
  • For spouses, significant others, or business partners, how do lenders evaluate credit worthiness?
  • And finally, what if an applicant doesn’t have FICO scores from all three credit bureaus?

Since most loans are sold to either Freddie Mac or Fannie Mae, I focused on the requirements for these types of loans.

Which FICO Score is Used for Mortgages

Most lenders determine a borrower’s creditworthiness based on FICO® scores, a Credit Score developed by Fair Isaac Corporation (FICO™). This score tells the lender what type of credit risk you are and what your interest rate should be to reflect that risk. FICO scores have different names at each of the three major United States credit reporting companies. And there are different versions of the FICO formula. Here are the specific versions of the FICO formula used by mortgage lenders:

  • Equifax Beacon 5.0
  • Experian/Fair Isaac Risk Model v2
  • TransUnion FICO Risk Score 04

If you want to dig into the regulations for Freddie Mac and Fannie Mae to see the source of this information, you can do so here and here. But be warned, it’s like trying to drink water from a fire hose.

Lenders have identified a strong correlation between Mortgage performance and FICO Bureau scores (FICO score). FICO scores range from 300 to 850. The lower the FICO score, the greater the risk of default.

Resource: Get your FICO score direcly from myFICO

Which Score Gets Used?

Since most people have three FICO scores, one from each credit bureau, how do lenders choose which one to use?

For a FICO score to be considered “usable”, it must be based on adequate, concrete information. If there is too little information, or if the information is inaccurate, the FICO score may be deemed unusable for the mortgage underwriting process. Once the underwriter has determined if a score is usable or not, here’s how they decide which score(s) to use for an individual borrower:

  • If all three scores are different, they use the middle score
  • If two of the scores are the same, they use that score, regardless of whether the two repeated scores are higher or lower than the third score

If it helps to visualize this information:

Identifying the Underwriting Score
ExampleScore 1Score 2Score 3Underwriting Score
Borrower 1680700720700
Borrower 2640
Borrower 3640660660660

Which Scores Are Used with Two Applicants

If there is more than one applicant, then the scores to be used for each individual are calculated as described above. Once the scores for each applicant are determined, the mortgage lender uses the lower of the two credit scores.

What If No Score is Available

In some situations, an applicant may not have a usable FICO score from one of the three credit bureaus. In that case, the mortgage lender will simply use the lower of the two scores that are available. And if two scores are not usable, they will use the one remaining score.

And since you may be wondering, if a mortgage applicant has no usable FICO scores, generally they won’t qualify for a mortgage. I say generally because there are exceptions. If you fall into this category, contact a mortgage broker to see what options you have.

Obtaining FICO Scores

If you are looking to buy or refinance your mortgage, how do you get a glimpse of your credit scores before applying? Well, one option would be to get your official FICO score from myFICO.

There are a number of ways to get your free credit score, which is where I’d start. They’re not perfect, but in my experience are pretty close.

Topics: CreditMortgages

16 Responses to “Which FICO Scores Do Mortgage Lenders Use?”

  1. As I am currently applying for a mortgage, I compared the lender reported credit score (744) with those available from the account management companies such as Credit Karma or Mint. The lender’s score is bar far the lowest.

    Mortgage lender reported FICO (Equifax) 744

    Credit Karma Transunion 777
    Credit Karma Equifax 792
    Mint Transunion 777
    Credit Sesame Transunion Vantage 3.0 776

    Discover Transunion FICOSCORE 8 833
    AMEX FICO Score 8 based on Experian 799
    Priceline FICO Credit Score 838
    Chase Transunion 777

    Average Credit Information 781
    Average Credit Cards 812

    Overall almost 40 / 70 points lower than what’s reported by other agencies. So either mortgage lenders like to lowball, to charge higher rates, or other agencies really don’t understand the FICOScore calculation.

  2. Debbie

    I have a contract on my house I’m going to buy. I just checked my credit karma and both trans union and equifax went up 30 plus on both. Yet my mortgage company says not true. What the crap is this all about???????

  3. my husband and i are dealing with this now. we did our credit reports through credit karma, scoresense, and experian to get an overall of what they were. They were showing about a 25-30 point difference (being higher) from what the bank pulled for mortgage loans. How is this? With ‘credit worthiness’ being so important, and being borderline for even a conventional loan, when we pull the reports it shows we qualify but when the bank pulls it, it shows we are 15 points below requirement…. how can individuals work on their credit if it isn’t even close… something isn’t right somewhere down the line… it should be an overall accurate score when pulled as to what banks pull… doesn’t make sense to me – sounds like excuses or ways to jack up interest rates…

    when banks say your score isn’t quite meeting our requirements and you pull it from home and get 650+ and minimum is 620!!!

    help me understand this please.

    • credit karma doesnt use the fico score model. their scores are always higher. banks use fico score. For you to get accurate fico score you can go to the myfico website and pull your scores/reports there.

      • “… their scores are always higher”
        I have found this to be false. Credit Karma’s scores will not always be higher than FICO, they will often be different. Credit Karma uses VantageScore not FICO but this does not mean they will be higher, in my case my FICO score is higher than my Credit Karma score.
        VantageScore is calculated differently than FICO. I have found in my dealings score sense is an out and out scam.

  4. I linked to this site after reading an article on Forbes titled: “Which credit score do lenders actually use?” I’ve always believed that credit scores were a shell game perpetrated by the banks to be used as a tool for charging borrowers higher rates & additional fees. The Forbes article confirmed my suspicion. In addition to the myriad of problems with the 3 credit bureaus (Equifax, TU, Experian), I learned that there are more than 60 different versions of FICO scores. The explanation for so many versions is that they are tailored to different types of industries & credit needs….i.e FICO-Auto for car loans, FICO-bankcard for credit cards, etc…and even within these subcategories, lenders use different scores, reports, and combinations….all of which continue to remain unknown to the borrower. Lenders need a means for evaluating the risk of making a loan…no one disputes that. The concept of a credit score that quantifies a borrowers history of repayment is fine, however, when the credit score of one potential borrower no longer has any relative value or correlation to the scores of other borrowers, then the entire model is invalid. With so many versions of credit scores being used in so many different combinations, there is no way a credit score can be a valid tool for comparing the “creditworthiness” of potential borrowers.

  5. chris cooke

    yes hi my name is chris and i would like to know the actual models used for determining the scores used because my brother just went to go get a car loan and the banks denied him because the car had too many miles and also when they brought the score out it was 20 points lower than his actual score so I contacted Equifax who the score was supposedly from and they said it was not his score so we contacted the other two transunion and experian and they said that the number was not theirs either so I contacted Equifax again and a helpful assistant there told me that sometimes they meaning the people who are giving the loans sometimes add all three scores and divide by 3 to get an average and use that as your score. well when you have the name of a company in this case Equifax beside a number and that is not the actual number it becomes falsifying documents needless to say we are about to sue for falsifying documents no because we didnt get the car but because well when you get your credit scores and they are 20 to 30 points higher than what the so called smart lenders say it is and you can prove it they have no reason to deny you anything. Also its illegal to falsify documents it wouldnt be falsifying if they would just disclaim that the score they are going to use it a combination of all your scores then divided to get the average but that wasnt the case here. so anyone got any info to share i would be happy to hear anything thanks for listening

  6. Is it necessary to use the middle score or can the highest score of the individual or the highest score of multiple borrowers be used. Is it at the banks discretion or is it a regulatory item?

  7. Allison

    Most mortgage lenders’ guidelines require the use of the lower/lowest of the borrowers’ middle scores. However, we have a couple of of lenders we sell to that will use the higher-earning borrower’s middle score.

    You are right that those scores you get free or pay for are just generic score models. Each industry – auto business, insurance, and mortgage all have industry-specific models they use to calculate borrowers’ scores.
    But seeing your score will give you a general idea of where you are in this area. Getting over certain crucial points like 680 or 720 will make your rate better or qualify you for mortgage insurance or a higher loan amount so always ask your mortgage professional if your score is a “just miss” or if they know how to help you “rescore” just a little higher with credit bureau software.

  8. Very interesting article! It’s unfortunate that FICO scores are so complicated. I would advise readers to investigate if they find out one of their scores is significantly different than the others. Could be a sign of a mistake!

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