English, a senior community development lending officer at Quontic Bank, mortgage lenders earn their FICO rating from all three agencies, but only use one when making their final decision. Each credit rating model interprets your credit profile information differently, in order to provide lenders with the information they need to approve your home loan application. Most mortgage lenders use FICO credit scores 2, 4, or 5 when evaluating applicants. A question that many buyers ask themselves is if a lender withdraws their credit more than once during the buying process.
Lenders withdraw credit from borrowers early in the approval process and, again, just before closing. Then it won't matter so much what specific credit score a lender uses, since all of your credit scores will be trending in the right direction. Even if your credit rating under another rating model would qualify, it won't matter if your rating under the lender's credit rating system doesn't meet the requirements. And if you apply for a mortgage with another person, such as your spouse or partner, FICO scores 2, 4 and 5 are extracted from each applicant.
An auto lender provides a very different type of loan than a mortgage lender or credit card provider, so you may want to emphasize different details in your credit report. However, mortgage lenders also go beyond their credit scores by evaluating a potential borrower's application. Lenders want to know details such as your credit score, social security number, marital status, residence history, employment and income, account balances, payments and debt balances, confirmation of any foreclosure or bankruptcy in the past seven years, and obtaining a down payment. During this phase, lenders require documentation to confirm your application information and obtain your credit history for the first time.
For example, if you apply for an auto loan, the lender is likely to use FICO's Auto Score model, which is designed for people looking for a car loan. If you apply for a mortgage from several lenders in a short period of time, usually a few weeks, most models will treat all of those requests as a single inquiry. If you apply for that type of loan, you'll need a mortgage rating that meets or exceeds that requirement. Every step you take to improve your credit score will lower your mortgage interest rate, so it's worth the effort to improve your credit.
Since the mortgage industry analyzes all three credit reports and scores, you may want to consider a paid credit monitoring service that obtains more complete data than a free version. Regardless of the credit scoring model your lender ultimately uses, you can take some basic steps to improve your credit score. The APR for any installment loan, such as a mortgage, reflects the cost of interest, expenses and fees over the life of the loan. For example, even if you have a good credit score, the lender could deny your application if you recently filed for bankruptcy or if you were foreclosed.
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