How Mortgage Lenders Use Your FICO Score

November 8, 2018
Posted in Programs
November 8, 2018 derekevansteam

How Mortgage Lenders Use Your FICO Score

FICO Credit Scores are the most widely used credit scores—used in over 90% of U.S. lending decisions. Lenders access FICO Scores to help them understand people’s credit risk and make better-informed lending decisions. By providing lenders with a fast, reliable and objective measure of credit risk, FICO Scores have made the lending process faster and fairer—helping millions of people get access to the credit they deserve.

Your FICO Credit Score is a vital part of your credit health. It can influence your credit and loan approvals and what terms and interest rates you qualify for. Because FICO Scores are the credit scores most widely used in lending decisions, viewing them can help you get a better understanding of how lenders will evaluate your credit risk when you apply for a loan or credit.

FICO Scores to help lenders decide a) whether to approve you, and b) what terms and interest rates you qualify for.

FICO Scores generally range from 300 to 850. Higher scores demonstrate lower credit risk, and lower scores demonstrate higher credit risk. What’s considered a “good” FICO Score varies by lender, and by the programs they can offer.

For example, applicants interested in applying for an FHA loan, with a down payment of 3.5% the minimum required FICO score is 580. If your credit score is below 580, however, you aren’t necessarily excluded from FHA loan eligibility. Applicants with lower credit scores may be required to put down a larger down payment in order to qualify for a loan, in addition to meeting the other program requirements.

Applicants with with FICO scores above 720 typically begin qualifying for prime rates.

Keep in mind, your FICO score is one part of the loan approval process. Your debt-to-income and cash reserves will play a part in whether you qualify for a loan. Your FICO score is the determining factor in what interest rate you can qualify for.

Mortgage lenders typically look at the credit scores issued by all three credit bureaus, and select the middle score as the one they’ll base their loan decision on. So, if your scores are 650, 637, and 698, the lender will use 650 as your score.

You can request access your credit score from one of the 3 credit bureaus: Experian, TransUnion, and Equifax, or you can use one of many free online credit report services to know where you stand.

Want to see your FICO Score in action? Call us today to get pre-approved!