Credit Score
A credit score is a numerical representation of a borrower's creditworthiness, derived from credit report data, that mortgage lenders use to assess the likelihood of loan repayment. Most mortgage lenders use FICO scores, with the middle score from the three major bureaus serving as the qualifying score.
What This Means
Credit Scores in Mortgage Lending
Mortgage lenders pull credit reports from all three major bureaus: Equifax, Experian, and TransUnion. Each bureau produces a FICO score, and lenders use the middle score (not the highest or lowest) as the qualifying score. For joint applications, lenders typically use the lower of the two borrowers' middle scores for qualification purposes. Most mortgage FICO models use older scoring versions, specifically FICO Score 2 (Experian), FICO Score 5 (Equifax), and FICO Score 4 (TransUnion) , though the industry is transitioning to newer models.
Minimum Score Requirements by Loan Type
Different loan programs impose different minimum credit score thresholds:
- Conventional loans - generally require a minimum score of
- FHA loans - minimum or
- VA loans - no official VA minimum, though most lenders require
- USDA loans - typically
Higher credit scores generally result in better interest rate pricing. A borrower with a score will typically receive the best available rates, while scores closer to program minimums carry rate adjustments that increase the overall cost of the loan.
Factors That Determine Credit Scores
FICO scores are calculated from five weighted categories: payment history (approximately ), amounts owed (), length of credit history (), new credit (), and credit mix (). Payment history and credit utilization together account for roughly two-thirds of the score, making them the most impactful areas for borrowers to manage before applying for a mortgage.