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Why Is My Mortgage Fico Score Different

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How Can My Fico Scores Affect My Mortgage Interest Rate

Mortgage Credit Score [Why it’s DIFFERENT!]

When a loan officer gets your mortgage application, they may use a pricing grid to figure out how your credit scores affect your interest rate, says Yves-Marc Courtines, a chartered financial analyst with Boundless Advice. Generally, higher scores can mean a lower interest rate, and vice versa.

From there, a mortgage loan officer will likely look at the rest of your loan application to decide whether your base interest rate needs any adjustments. For example, if youre making a smaller down payment, you may be given a higher interest rate, says Courtines.

A banks pricing grid may change on a daily basis depending on market conditions. However, heres an example of what you might expect your base interest rate to be, based on your credit score, on a $216,000, 30-year, fixed-rate mortgage.

FICO® score range

Source: myFICO, November 2020.

Your Mortgage Credit Score Might Not Be What You Expect

Many home buyers dont realize they have more than one credit score. And the score a mortgage lender uses may be lower than the one you see when you check it yourself.

Finding out late in the game that you have a lower mortgage credit score could be an unwelcome surprise. You might end up with a higher interest rate and/or smaller home buying budget than youd planned.

So before you apply, its important to understand how lenders look at credit and what score you need to qualify.

How Does Applying For New Credit Impact My Fico Score

Applying for new credit only accounts for about 10% of a FICO® Score. Exactly how much applying for new credit affects your score depends on your overall credit profile and what else is already in your credit reports. For example, applying for new credit may have a greater impact on your FICO® Scores if you only have a few accounts or a short credit history. That said, there are definitely a few things to be aware of depending on the type of credit you are applying for. When you apply for credit, a credit check or inquiry can be requested to check your credit standing.

If you don’t see the answers to your questions:

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Each Credit Bureau Utilizes Uses A Slightly Different Scorecard

While all three bureaus use the same FICO scoring model there are minor variations between them. Each bureau scoring model was developed separately so even though they are based on the same FICO scoring model, they are not exactly the same since they are based on Score Factors . There are 30-40 different Score Factors that could affect your credit score. Each of these Score Factors carries a different point valuation, which can also vary by bureau. For example the score factor too many revolving balances could carry a weight of 10 points with one bureau but 13 with a different bureau. Your score will usually be based on 4 Score Factors and as many as 5 if inquires have affected the score. Even the wording of the Score Factor can vary per bureau, which can affect your FICO score. Because of these variances even if all three bureaus had the exact same information the FICO scores could still be different.

As if the world of credit scoring was not confusing enough, this may make it more frustrating. In a perfect world,creditors would report to all three bureaus at the same time of the month and all three bureaus would use the same Score Factors. But until this happens, you can stay ahead of the confusion by arming yourself with as much information as possible about how the scoring system works. Our team is always here to help. You can also check out our credit scoring video webinars available on our website.

Mindy Leisure

Why You Can Trust Bankrate

Why Is My Credit Score Different Depending Where I Look?

At Bankrate, we have a mission to demystify the credit cards industry regardless or where you are in your journey and make it one you can navigate with confidence. Our team is full of a diverse range of experts from credit card pros to data analysts and, most importantly, people who shop for credit cards just like you. With this combination of expertise and perspectives, we keep close tabs on the credit card industry year-round to:

  • Meet you wherever you are in your credit card journey to guide your information search and help you understand your options.
  • Consistently provide up-to-date, reliable market information so you’re well-equipped to make confident decisions.
  • Reduce industry jargon so you get the clearest form of information possible, so you can make the right decision for you.

At Bankrate, we focus on the points consumers care about most: rewards, welcome offers and bonuses, APR, and overall customer experience. Any issuers discussed on our site are vetted based on the value they provide to consumers at each of these levels. At each step of the way, we fact-check ourselves to prioritize accuracy so we can continue to be here for your every next.

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Which Mortgage Lenders Use Fico 8

Asked by: Orland White

FICO 8 is a released in 2009. Since then, only a few lenders have adopted it. The vast majority of lenders still rely on FICO 2, 4, and 5 scores, which are all part of a larger report that mortgage lenders can obtain called the residential mortgage credit report .

Equifax, Experian, and TransUnion1 FICO Score 8 is the most commonat least 700 is considered a good scorepredict the likelihood of not paying as agreed in the future on any credit obligation

What Was New With Fico Score 9

While the underlying foundation of FICO Score 9 is consistent with previous versions, there are several unique features that make up FICO Score 9:

  • Any third-party collections that have been paid off no longer have a negative impact.
  • Medical collections are treated differently than other types of debt. Unpaid medical collections will have less of a negative impact on FICO Score 9.
  • Rental history, when it’s reported, factors into the score. This may be especially beneficial for people with a limited credit history.

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After My Down Payment What Other Related Mortgage Fees Do I Need To Consider

Once youve settled on a down payment, its important to take stock of your closing costs. Closing costs often run between two to three percent of your total loan. Other fees include the loan origination fee, the loan application fee, the title services fee and appraisal fee. Additionally, you might consider setting up an escrow account, which guarantees 12 months of property taxes and homeowners insurance.

Why Are Consumers So Confused About Credit Scores Why Is My Credit Score Different When A Lender Pulls It Compared To What I Just Bought Online

Why is my credit score or FICO different from Lender to Lender?

Credit Scoring leader FICO has over fifty different versions of scores with many different ranges. On top of that, the repositories created their own credit score called Vantage. Vantage Scores have a different range for each version of their score. This is part of my continuing education class I did for MSHDA at their annual Building Michigan Communities Conference. We pick up the presentation when I am explaining why the repositories decided to team up and create a competitor to FICO.

Experian, Equifax and TransUnion said.So FICO is making all this money based on our data, what if we came up with a credit score to compete with FICO? Someone said OK that sounds like a good idea. We will call it Vantage, but we will make our range slightly different than the FICO range, it will overlap on the top side 501-990.

As we know FICO is 300-850, If people go out to www.AnnualCreditReport.com and they pull their credit score from that federally mandated website, they are going to get a Vantage Score.

The problem is, a borrower can have a Vantage score of 700 and when the lender goes to pull that same borrowers credit report they could have a 599 FICO score. This is where consumer gets mad at the mortgage company thinking the mortgage lender is trying to rip them off. The consumer would say I have a 700 credit score but you pulled my credit and you are saying it is a 599. There are not very many borrowers getting a mortgage at 599.

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How Is A Fico Score Calculated

The company applies a proprietary formula to the data in your credit reports to produce a score.

Often, the three credit bureaus that create your credit reports Equifax, Experian and TransUnion have slightly different data from one another. So your score may vary depending on which bureau’s data was used.

Do You Qualify For A Mortgage

You can check your own credit score online, and talk with a lender to see whether you qualify for a mortgage based on your current score.

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Step by Step Guide

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How Do I Find Out My True Credit Score

With so many credit scoring models, you really dont have just one true score, but many. Your scoredepends on all of the factors mentioned above in addition to what type of lender you apply to for credit.

Its important to remember that everyones scores are different because they represent a snapshot in time of the particular individuals current and past credit habits. By following the tips mentioned above long term, you can definitely build and maintain scores to be proud of.

Whats The Difference Between Educational And Lender Scores

Why Is My Credit Score Different When a Lender Pulls It ...

When an individual goes to check their consumer credit score they will typically start with a free online service. These services pull your credit information from one of the three major credit reporting bureaus Equifax, Experian, or TransUnion. The score that is returned is a VantageScore, also called an educational score. On the other hand, your mortgage lender will pull a FICO credit score, which includes credit history from all three of the credit bureaus together.

Heres are the main difference between your VantageScore and the lenders FICO score. Because a VantageScore is free, its a more generalized result, versus a FICO score which comes from a paid monitoring source. Additionally, not all your creditors report to each of the three credit bureaus, which means a score that comes from a single source may not show your entire credit history. This can skew your score.

The final and very important difference between the two is the scoring range. VantageScores range from 501 to 990, while FICO scores range from 300 to 850. As you can see, a VantageScore will almost always be higher than a FICO score.

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What Credit Score Do Lenders Use

The two main companies that produce and maintain are FICO® and VantageScore. Lenders most commonly use the FICO® Score to make lending decisions, and in particular, the FICO® Score 8 is the most popular version for general use. If you’ve taken an interest in the health of your credit and how lenders will view it, checking your FICO® Score 8 is a smart place to start.

There are, however, many types of FICO® Scores. FICO® has released updates to its basic score over the years, and the FICO® Score 10 is the most recent. Mortgage lenders most often use older versions to assess applicants: the FICO® Score 2, 4 or 5.

There is also the FICO® Bankcard Score and the FICO® Auto Score . If you know you’re interested in a certain type of credit, it could be worthwhile to check beforehand the specific score type you know a lender will look at.

How Does My Credit Score Affect My Mortgage

Your credit score directly affects the interest rate on your mortgage. Basically, high credit scores lower your interest rates, while low scores cause them to rise. If I already have a high credit score, what else can I do to lower my mortgage rates? If you can afford higher monthly payments, then opting for a shorter loana 15-year instead of a 30-year loancan help reduce your interest rate. Short-term loans cost banks less money. In appreciation, your bank might reward you with an interest rate as much as one percent lower than that of a long-term loan.

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Can I Expect The Fico Score Version I Receive From Wells Fargo To Change

FICO® periodically updates its scoring models and Wells Fargo may choose to upgrade to a more updated score version. If this happens, we’ll notify you when a change to the score version change occurs. You can locate the score version on your FICO® Score display. It is listed directly below the score and rating.

Which Credit Scores Do Mortgage Lenders Use

Why are my Credit Scores Different? FICO vs Vantage A Credit score by a different name

When you apply for a mortgage, lenders will generally request all three of your credit reports and a FICO® Score based on each report. However, the type of FICO® Scores they request are often older versions, due to guidelines set by government-backed mortgage companies Fannie Mae or Freddie Mac. It can be important to know about these different FICO® Score versions when you’re planning to buy a home.

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Improve Your Credit Scores Before Applying

The FICO® Score versions used in mortgage lending and the more recently released versions, such as FICO® Score 9 and 10, have the same 300 to 850 range. VantageScore, a competing maker of credit scores, also uses that range for its latest VantageScore 3.0 and 4.0 model credit scores.

For all these scoring models, which use the information from one of your credit reports to determine your score, a higher score is better. As a result, you may notice similar trends in all your scores. This is why making on-time payments can help raise all your credit scores, while missing payments could hurt all your scores.

However, there are also differences between the scoring models. For example, the latest FICO® and VantageScore models ignore paid collection accounts and give less weight to medical collection accounts. But the older FICO® Score models continue to count collection accounts against you after you pay off the balance.

In general, whether you’re looking to buy a home or take out a different type of credit, there are a few things that can help improve all your scores:

  • Pay your bills on time.
  • Pay down credit card balances.
  • Don’t apply for other types of credit in the months leading up to your mortgage application.

In addition to getting your application, you want to get your finances in order as well. Saving up for a larger down payment, increasing your income and paying off debts may all help you qualify for a mortgage with better terms.

What Scores And Models Are Used When Applying For A Mortgage

FICO® created different scoring models for each credit bureauExperian, TransUnion and Equifax. The commonly used FICO® Scores for mortgage lending are:

  • FICO® Score 2, or Experian/Fair Isaac Risk Model v2
  • FICO® Score 5, or Equifax Beacon 5
  • FICO® Score 4, or TransUnion FICO® Risk Score 04

Mortgage lenders will often get a single report that contains your credit reports from each of the three credit bureaus and the associated FICO® Scores. It may base the lending decision on your middle credit score or, if you’re applying jointly with a partner, the lower middle score.

Keep this in mind when you’re trying to figure out what . If you’re looking for a mortgage that requires a minimum credit score of 580, you may need your middle score to be at least 580 based one these specific FICO® Score models.

There are exceptions, though. Mortgage lenders could use different credit scoring models for loans that aren’t secured or bought by Fannie Mae or Freddie Mac. You might even be able to get a mortgage if you don’t have a credit history or score at all.

Additionally, there’s a review underway that could open up the use of different credit scoring models for mortgages, even if they’re secured or bought by Fannie Mae or Freddie Mac. However, until there’s a change, many mortgage lenders will continue to use these three classic FICO® Scores.

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