Published on Apr 05, 2025 5 min read

The Most Common Credit Scores Used by Mortgage Lenders

When you apply for a mortgage, your credit score plays a major role in determining whether you qualify and what terms you’ll receive. Mortgage lenders use specific credit scoring models to evaluate your financial reliability and predict your ability to repay the loan. Understanding the most common credit scores used by lenders can help you prepare and improve your chances of approval. This guide will explain the basics, so you know what to expect during the loan process.

Understanding Credit Scores

The credit score uses three digits to show a person's financial reliability through their previous handling of money matters. When lenders judge your risk for approval of loan money this score serves as their primary basis. A higher credit score indicates that lenders will approve your loan application with better lending conditions.

FICO Score

The FICO score is one of the most widely used credit scoring models by mortgage lenders. Developed by the Fair Isaac Corporation, it evaluates several factors from your credit report to calculate a score ranging from 300 to 850. The main factors influencing your FICO score include your payment history, the amounts you owe, the length of your credit history, the types of credit you use, and any recent credit inquiries. Payment history, which accounts for about 35% of your score, is the most critical factor, as it reflects whether you have consistently paid your bills on time.

Variants of FICO scores commonly reviewed by lenders

FICO Score 2 (Experian)

The FICO Score 2, also known as Experian/Fair Isaac Risk Model V2, is based on information from your credit report at Experian. It is used by mortgage lenders to assess the risk of lending you money for a home purchase or refinance. This scoring model ranges from 280 to 850 and places a greater emphasis on your payment history.

FICO Score 5 (Equifax)

The FICO Score 5, also known as Equifax Beacon 5.0, is based on information from your credit report at Equifax. It is commonly used by mortgage lenders to evaluate your creditworthiness for a home loan. Like the FICO Score 2, it ranges from 300 to 850, but places a greater emphasis on your debt-to-income ratio and recent credit inquiries.

FICO Score 4 (TransUnion)

The FICO Score 4, also known as TransUnion/Fair Isaac Risk Model V4, is based on information from your credit report at TransUnion. It is used by mortgage lenders to assess the risk of lending you money for a home purchase or refinance. This scoring model ranges from 300 to 850 and takes into account your payment history, amounts owed, length of credit history, and types of credit used.

VantageScore

VantageScore is another popular credit scoring model used by some mortgage lenders. It was created as a joint venture by the three major credit bureaus – Experian, Equifax, and TransUnion. Unlike FICO scores, which range from 300 to 850, VantageScore ranges from 501 to 990. This model also places a greater emphasis on recent credit behavior rather than overall credit history.

Other Credit Scoring Models Used by Mortgage Lenders

Aside from FICO and VantageScore, there are other credit scoring models that mortgage lenders may use to evaluate your creditworthiness. These include:

• BEACON Score: Developed by Equifax for mortgage lending purposes.
• PLUS Score: Developed by Experian to complement the FICO score.
• TransRisk Score: Developed by TransUnion to predict the risk of delinquency on existing credit accounts.

It’s important to note that while these scoring models may have different ranges and factors, they all use similar information from your credit report to calculate your credit score. So, even if you are applying for a mortgage with a lender that uses a different scoring model, it is still crucial to maintain a good credit history and make timely payments on all your accounts.

How Mortgage Lenders Use Credit Scores

Mortgage lenders not only look at your credit score but also consider other factors such as income, employment history, and debt-to-income ratio when evaluating your loan application. A higher credit score can improve your chances of getting approved for a mortgage and help you secure better interest rates and terms. On the other hand, a lower credit score may result in higher interest rates or even disqualification from obtaining a mortgage.

Tips for Improving Credit Scores Before Applying for a Mortgage

If you are planning to apply for a mortgage in the near future, there are steps you can take to improve your credit score and increase your chances of approval. Some tips include:

Review your credit report for errors

Make sure to review your credit report from all three major credit bureaus - Experian, Equifax, and TransUnion. If you notice any errors or discrepancies, dispute them with the respective bureau.

Pay all bills on time

Payment history is a significant factor in determining your credit score. Make sure to pay all bills on time to avoid any negative impact on your credit.

Reduce debt and keep balances low

High levels of debt can negatively affect your credit score. Try to reduce outstanding balances and keep them at a manageable level.

Avoid opening new lines of credit

Opening multiple new lines of credit within a short period can have a negative impact on your credit score. It is best to avoid such actions before applying for a mortgage.

Conclusion

Understanding the different credit scoring models used by lenders and taking steps to improve your credit can greatly increase your chances of getting approved for a mortgage with favorable terms. Remember to regularly check your credit report, make timely payments, and keep debt levels low to maintain a good credit standing. So, continue monitoring and working on improving your credit score even after obtaining a mortgage to ensure long-term financial stability and success.