Understanding mortgage scores

[Anonymous]

When a lender says you must have a minimum Fico score of this number to apply for a mortgage are they using Fico mortgage score or Fico 8?  For example Quicken Loans has a 1% down program that says you need a FICO score of 680.  Is this Fico 8 or 2? 

I am just looking to what Fico score type I should be using as I build credit and a lender says you need a min score to apply.  Thank you!

[NC_Mtg_Loaner]

Not sure for certain what the difference is but hopefully, in general, this information I'm adding will help you.

Equifax uses the Fair Isaac Corp.'s scoring model algorithms in order to provide consumers with a credit score.   

Most mortgage lenders will obtain a tri-merge copy of your credit report in order to research Equifax, Experian and Trans Union jointly.   Keep in mind they all use different algorithms that help provide you with a credit score, so you should really focus on the types of spending and credit management habits that are healthy and then you'll have good results no matter what scoring model or credit reporting system you are subject to utilizing. 

[Anonymous]

The key thing to understand is the difference between bureaus and scoring models. 

There are three bureaus: Experian (EX), Equifax (EQ), and TransUnion (TU).  The bureaus can be thought of as warehouses where data are stored.  These data are summarized in credit reports that list all the accounts you have (or have had) along with good and bad stuff about them.

FICO is a company that makes scoring models, which are elaborate computer programs that take all those data and turn them into a single number, typically between 300 and 850, that indicates to a prospective creditor how likely you are to pay back your debts and to do so on time.  FICO makes many scoring models.  FICO 8 was released in 2008/2009 and is used by lots of creditors for making decisions about car loans, personal loans, and credit card applications.  (There are also flavors of FICO 8: Classic, Auto, And Bankcard Enhanced.)  FICO also made scoring models several years before FICO 8.  These are still today the chief models used by almost everyone in the mortgage industry.  These are often called one's "mortgage scores."

Models made before FICO 8 unfortunately have many different names.

• Experian FICO Score 2  (also known as EX-98 or Risk Model v2)
• Transunion FICO Score 4  (also known as TU-04 or Transunion FICO Risk Score Classic 04)
• Equifax FICO Score 5  (also known as EQ-04 or Beacon 5).

These are the three mortgage scores.

A mortgage lender will pull all three scores and use your "middle" score.

If you apply for a car loan or personal loan or credit card, the lender will most likely pull only one bureau and will likely use some flavor of FICO 8.  A few lenders are using FICO 9, and a few use models older than FICO 8.

[Anonymous]

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@Anonymous wrote:

When a lender says you must have a minimum Fico score of this number to apply for a mortgage are they using Fico mortgage score or Fico 8?  For example Quicken Loans has a 1% down program that says you need a FICO score of 680.  Is this Fico 8 or 2? 

I am just looking to what Fico score type I should be using as I build credit and a lender says you need a min score to apply.  Thank you!

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If you tell us when you guess you might buy a house, we can suggest a cost-effective plan to build credit, including what tools to use to check your reports and scores.  "When" would be your best guess at this point: five weeks from now, five months, five years, etc.

[Anonymous]

Thank you for your replies.

We have an open time frame to buy.  We are under a lease until the end of Feb then we will go month to month and can look if we want.  I am hoping to start looking in June or so.  I am trying to get our credit ready in case that perfect house comes along, but if it doesn't we have until March 1st 2019 to buy a home. 

[Anonymous]

Since you will likely not begin looking for a home until June, and might not actually buy for several months after that, I would start now with using free and ultralow cost credit monitoring tools.  For the next few months, work on learning what your reports say and if possible getting them in optimal shape. 

The $1 trial offer at Credit Check Total would be a good choice.  It will give you a 3B report and your FICO 8 scores.  FICO 8 is a decent approximation to your mortgage scores for a person who won't be buying for many months -- as long as you don't have collections on your reports that are all under $99.  (If that were the case, FICO 8 would give you a very different result.)

Work with people here on getting your reports optimized.  You want to know if you have any derogs on them (lates, chargeoffs, collections, liens, judgments, public records, etc.) -- and if you do have any derogs, you want to start a vigorous campaign to see how many of them you can get removed.

You also want to pay all credit cards to $0 except one with the remaining card showing a small positive balance.

After your reports are in better shape you can pull your mortgage scores.

We can recommend some free tools that will enable you to frequently pull your credit reports.

[Anonymous]

I used the $1 credit check 2 weeks ago and at that time the scores were: 

Experian   652  

Transunion  627  

Equifax  662

I also paid the $5 to get the Experian mortgage score 2 days ago it was 642.  I use the Experian free FICO that updates once a month and also get the Transunion through Walmart.  Our past credit score was really bad because of health emergencies but I have worked really hard to get everything caught up and there has been no lates for 13 months.  

I use Credit Karma to keep an eye on issues that may show up.  Were is the best place to find out if there are collections going on?  We had an issues when we changed car insurances the old one claimed we owed double as a final balance and I asked them to send me proof and they sent us to collections.  When they contacted us I panicked and paid the part of the bill I felt I owed and then got mad and told them I was not paying anymore unless I get proof.  That was 2 years ago and it has not shown up anywhere.  Also my step daughters mom kept taking their child to the doctor without paying the co pay and putting it in my husbands name and it went to collection several times.  We showed proof we were not responsible to the companies but I am afraid they are going to pop back up.

Thank you!

[Anonymous]

I suggest you head over to the rebuilding forum and work with the folks there.  I suggest you also pull your full credit reports (all three) at AnnualCreditReport.com

How many credit cards do you have right now?  Do you have all of your cards reporting $0 except one?  The remaining card should have a small balance, like $10 say.  It should also be a true credit card (not a charge card) and be a card in your name (not an AU card).