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What Credit Scores Do Mortgage Lenders Use?

What Credit Scores Do Mortgage Lenders Use?
stacey sprain
Home.com Contributor

As a consumer, you’ve likely been offered opportunities to access your free credit report and scores through many online sources.

You may have even taken advantage of free credit report and scores through your bank or credit card company.  

All of these are excellent ways to check and monitor your personal credit report as well as your credit scores. But there’s a catch: The credit scores you receive from the majority of these free offers are not the same credit scores mortgage lenders will use when you apply for credit.

What's in this Article?

Why do scores differ between online sources and lenders?
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What are FICO Scores?
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How are FICO scores determined?
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What are the most commonly used FICO scoring models?
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How do I find out my true credit score?
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Why do credit scores differ between online sources and mortgage lenders?

Here’s a common story: You apply with a lender thinking that you know your credit scores. Then, the lender informs you that its credit scores were far lower than the free scores you got online. There’s good explanation. There are many different versions, models, and algorithms when it comes to credit scores dependent upon the purpose and type of industry.

The main goal of credit scoring is to predict the likelihood that a person will fall at least 90 days behind on a bill within the next 24 months.

Consider this: There is no default risk to allowing you to check your credit and credit scores online or through an app. However, the default risk to an auto lender for granting you a $40,000 loan is far greater than that of a credit card company that is considering a $2,000 credit limit.

In comparison, the risk associated with granting you a $200,000 mortgage loan is far greater than any of the prior examples. It makes sense that each type of creditor would use a different type of credit scoring.

Related: Raising Your Credit Score Can Save Thousands in Interest. Here’s Why.

What are FICO Scores and how do they differ from credit scores?

Most mortgage lenders use credit scores called FICO scores. “FICO” stands for Fair Isaac Corporation, the first company to bring a credit risk model with a score to market around 1989. Fair Isaac’s goal was to provide an industry standard for scoring creditworthiness that was considered to be fair for both lenders and consumers. Since then, more than 90% of mortgage lenders have adopted the use of FICO credit scores to help predict a consumer’s ability to repay debt on time and as a way to assign interest rates and terms.

But the thing is, FICO scores have many versions and models, and credit bureaus are constantly updating each to ensure they remain predictive. Consumer behaviors change, as do technology, information, and industry practices.

Think of your FICO scores as three-digit numbers that summarize the data in your credit report, both positive and negative. Your FICO scores are an indicator of how long you’ve had credit, how much credit you have currently, how much of your available credit you’re using currently, and whether or not you’ve been repaying your debts on time, among other factors.  

The main goal of credit scoring is to predict the likelihood that a person will fall at least 90 days behind on a bill within the next 24 months.

Ok, so which of my 3 FICO scores do lenders use?

When your lender pulls your credit, you will get not one but three scores. That’s because there are three main credit bureaus. Which one does the lender use?

The answer is your “middle score.”

As the name suggests, the middle score is the one in the middle of your three scores. For instance, if your credit report shows 690, 700, and 710, then 700 is your middle score.

If you are applying with someone else, the lender will use the lower of the two middle scores for eligibility purposes. (There is a new rule, however, that grants an exception to this standard.)

The following table demonstrates middle scores.

BureauBorrower 1Borrower 2
TransUnion681719
Equifax704725
Experian692707
Middle Score692 (Qualifying middle score)719

How are FICO scores determined?

Overall, FICO scores are determined from the following criteria.

Payment history

Payment history makes up 35% of your FICO scores. The more late payments and derogatory accounts in your credit history, the lower your FICO scores will be. In retrospect, the more accounts with perfect payment histories, the higher your FICO scores are likely to be.

How to maximize your payment history

Bring all of your accounts current and keep them current. Past due balances reflect negatively. If you’ve never experienced past due accounts, pat yourself on the back and make it a goal to keep it that way.

Pay your bills on time each and every month when due. This may require you to work with a budget plan and you may be best setting up automatic payments so it’s easier for you to manage monthly due dates. Even if you’ve experienced the occasional late payment, the more time that passes after it, the better credit risk you become. 

Reach out to your creditors if you’ve fallen behind and find it challenging to catch up. Most creditors will have suggestions of ways to help you. Some may suggest things like refinancing, extending your repayment term, or reducing your interest rate. The only way to know if any of these could be useful to you is to ask. 

Credit utilization

The amount of available credit you’re using makes up 30% of your FICO scores. This is also known as your credit utilization ratio. If you have $5,000 in available credit among your credit cards but are only using $1,000 of that total available credit amount, your credit utilization ratio is 20%. Your credit profile looks much better than for someone who is maxing out and using all $5,000 of their available credit month to month. The lower your credit utilization, the higher your FICO scores are likely to be.

How to maximize your credit utilization

Don’t close credit cards that you no longer use. Instead, leave these accounts open with $0 balances. This will increase your available credit balances while keeping your utilization rates lower than if you closed the accounts. Leaving the accounts open will also help them count toward your length of credit history as well.

Take a look at how many accounts have balances, in particular credit card accounts and finance company accounts. Add up those balances for a total. Then add up the total credit limits. Divide the total balances by the total credit limits and it will provide you with your credit utilization ratio. It’s always best to keep that ratio below 30%.

Account Balance Credit limit
Credit Card 1$250$1,000
Credit Card 2$500$1,500
Credit Card 3$50$2,000
Credit Card 4$750$5,000
Total$1,550$9,500
Credit Utilization Ratio16% ($9,500 / $1,550) 

Length of credit history

Credit history determines 15% of your FICO score calculation. The longer you’ve had credit accounts reporting to the major credit bureaus, the better.

How to maximize length of credit history

As indicated in the category above, never close open accounts just because they have no balance or you do not actively use them. Those aged and zero balance accounts still have benefit to you because they will continue counting in your length of credit history as older/aged accounts.

Mix of credit types

An additional 10% of your FICO score calculations are dependent upon your overall mix of credit and type of accounts. A consumer with numerous credit card accounts and unsecured finance loans would be considered a higher risk than a consumer with a mix of credit cards, installment loans and mortgage loans. Someone with a more extensive credit mix might expect to have a higher FICO score than someone with only credit card accounts, assuming that both have made timely payments.

How to maximize credit mix

Don’t start applying for other types of credit you don’t need simply to try and improve your credit mix. Applying for credit causes “hard inquiries” which show up on your credit report and can bring down your credit score, depending on the number and types of inquiries.  

A good credit mix include multiple types of revolving accounts like a gas card, a department store card, a bank credit card and/or a home equity line of credit.  

A good mix of installment debts might include a student loan, an auto loan and/or a mortgage loan.

When it comes to credit mix, the most important factor is showing that you have been making timely payments on all your accounts, regardless of the type of accounts or mix of accounts you have.

Applications for credit

Finally, 10% of your FICO score depends upon your applications for and use of new credit. Your credit report retains a 24-month history of all new credit inquiries from creditors and lenders with whom you’ve applied. However, FICO scores only consider those made in the past 12 months.

How to maximize new credit use

Apply for new accounts only when you feel it’s a need. Be particularly cautious around the holidays when you may be tempted by certain stores to open new accounts to save a certain percentage on your purchases. Keep in mind that every new account you apply for and open, may have negative impacts on multiple FICO categories.

Don’t apply for and open new accounts too rapidly, even if you are new to establishing credit. New accounts will lower your average account age which may have negative impact on your FICO Scores. Even if you have used credit for a long time, opening a new account can still lower your FICO Scores.

What are the most commonly used FICO scoring models?

As mentioned previously, there are many different FICO score versions and models, depending upon the type of creditor who uses them. This explains why free credit scores from online sources and apps may differ significantly from the credit scores a creditor or lender uses for a credit decision.

An understanding of which credit scores mortgage lenders use may influence your strategies during the homebuying process.

  • The consumer credit scores you receive from free sites such as Credit Karma are based on VantageScore 3.0, which is a completely different credit scoring model than FICO. 
  • Auto lenders use FICO Auto Scores 2, 4, 5, 8 and 9
  • Credit Card Issuers use FICO Score 3 and Bankcard Scores 2, 4, 5, 8 and 9
  • Mortgage lenders use FICO Scores 2, 4 and 5.

How do I find out my true credit score?

With so many credit scoring models, you really don’t have just one “true” score, but many. Your score depends on all of the factors mentioned above in addition to what type of lender you apply to for credit.

It’s important to remember that everyone’s scores are different because they represent a snapshot in time of the particular individual’s current and past credit habits. By following the tips mentioned above long term, you can definitely build and maintain scores to be proud of.


Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.

Fairway is not a registered or licensed credit management service provider. Please consult a credit counselor regarding your specific situation.

Further Reading

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Hard Inquiry vs. Soft Inquiry: What’s the Difference?

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How to Dispute Your Credit Report and What to Expect

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