When purchasing a home, one of the very first steps is understanding where your credit scores sit in relation to obtaining a mortgage. The higher your credit score, the less you will pay in interest and the difference is significant. The credit scores used for mortgage approval are different than what you would see on Credit Karma. It is important to have the right scores ahead of time.
The Credit Scores Used for Mortgage Approval is Always FICO
If this isn’t the case, well, it is close. No lender I am aware of uses anything but FICO scoring for approval. While companies like Credit Karma provide a credit score, these scores are not FICO and will very likely be different. What complicates it further is FICO has over 40 variations of scores, and mortgage lenders use very specific flavors of this.
Which FICO Score is Used in Approval?
Mortgage lenders use traditional and time tested scoring algorithms when approving their loans. Even as FICO releases new versions such as FICO 9, mortgage lenders will use versions decades old. Why is this this the case? Financial institutions change at snails pace, but quite frankly, the newer versions are catered to credit card lending.
The FICO scores used for mortgages:
- Equifax Beacon® 5.0
- Experian®/Fair Isaac Risk Model V2SM
- TransUnion FICO® Risk Score, Classic 04
These are often listed differently on the tri-merge mortgage report your lender will use and provide you:
- Equifax/FICO classic V5 FACTA
- Experian/Fair Isaac (Ver. 2)
- Transunion/FICO Classic (04)
Where to Get Your Mortgage Scores Ahead of Time?
This is where it gets a bit tricky. You can purchase these scores from MyFICO but it will cost you $50 dollars. With a purchase as important as a home, this is a pretty small price to pay to have piece of mind. Often, consumers will piece together their credit through various sources first, which isn’t a terrible idea but when meeting with a lender it is best to have the correct FICO scores. On MyFICO, it is easy to see as they will group the common mortgage scores together.
This article was last updated on May 9, 2022