The Scores That Matter in Mortgage Lending
, by Tom Quinn
So you're ready to take on a new mortgage and you've done your research. You have been educating yourself about credit scores, the credit process and how lenders evaluate credit for mortgage loan applications as you are getting ready to purchase a new home. And you know understanding your FICOŽ Scores is really important as they are the credit scores most commonly used in the mortgage lending process.
You've pulled your FICOŽ Scores and credit reports at myFICO to see where you stand but are not sure on which FICO Score versions you should focus. Do mortgage lenders use FICOŽ Score 8 from all three credit bureaus or FICO Score 8 from one and FICOŽ Score 5 from another? I know, it can be kind of confusing.
Let me explain ...
When you access your credit report and FICO Scores at myFICO, you now get access to more than one FICOŽ Score version. That's because different lenders may be using different versions of the FICO Score in their credit review processes and we want to make sure you are getting access to the FICO Score version your lender is likely using.
Why are there multiple versions? It boils down to two main reasons:
FICOŽ Scores have been an important component of most lenders' credit criteria for the past 25 years. Over that time we have periodically updated the FICO Score mathematical formulas several times to keep them up to date and to maintain their predictive power. It's similar to how there are multiple generations of smartphones in use today.
There are FICO Score versions tailored for select types of credit such as auto and bankcard lending. If you are applying for a car loan or signing up to get a credit card, there is a good chance the lender is using one of these tailored score versions
Each lender determines what FICO Score version they will use in their credit evaluation process. Generally speaking in most cases, you likely won't know what version a lender is going to pull when evaluating your credit request.
However, in mortgage lending it's less confusing. It is highly likely that the following FICO Score versions will be pulled on all mortgage applicants and from all three credit bureaus.
FICOŽ Score 5 based on Equifax data
FICOŽ Score 2 based on Experian data
FICOŽ Score 4 based on TransUnion data
Sometimes you may see or your lender may reference these versions in slight variations to the list above. For example, check out FICO Score version information found on Fannie Mae's website ) where they reference them as follows:
Equifax Beacon 5.0
Experian/Fair Isaac Risk Model V2SM
TransUnion FICO Risk Score, Classic 04
As you can see, there are some differences but most industry references to the FICOŽ Score versions commonly used in mortgage lending will have the appropriate version 5, 2 and 4 version number to the corresponding credit bureau listed.
Hope this provide some clarity. You can now focus on those mortgage-related versions in your FICO Score explanation report with confidence knowing they are the same versions your mortgage lender will likely access in the mortgage loan review process.