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A mortgage credit score can be different than scores you get from other places. This is important since your credit score will determine what you pay.

You can get an idea of your scores from other sources but until a mortgage company pulls your credit, you will not know for certain. And one point can make a huge difference.

Mortgage Credit Score 101

A mortgage credit score may be different than a credit score for a car loan or some other credit pull. The 3 credit repositories are TransUnion, Equifax, and Experian. They each calculate a score for you. The scores each one calculated may be a little different depending on what kind of company pulls your credit.

If a mortgage company pulls your credit, more importance will be put on your mortgage payment history to calculate a credit score. If a car company pulls your credit, more importance will be put on your car payment history. And if you got your own credit report either free or paid, those scores may be a little different than your mortgage credit scores.

A car company usually only uses one score. They pull from only one repository like Experian for example. Mortgage credit scores have to include all 3 repositories. It is called a tri bureau merge. Each repository calculates a credit score and also reports all balances, monthly payments, and payment history. The monthly payments are used to calculate your mortgage debt to income ratio.

There can be incorrect information reported by one or more repositories. If you paid a loan off in full but for some reason it did not get reported to a repository, it will show up on your mortgage credit report. When that happens, you have to show the underwriter your loan is paid in full with documentation from the creditor.

It is too late at this point to get the repository to change their report so producing the paid in full statement is the easiest way to satisfy the underwriter. You should still send it to whoever is reporting it wrong and get it removed for the next time.

Mortgage FICO Score

The word FICO score is used all the time in the mortgage industry. There is an actual credit score named the FICO score but in the mortgage world, it just means your middle score. The automated underwriting computer takes into account all 3 of your scores when making a decision. However for pricing and rates, it is always your mortgage FICO score.

Your mortgage FICO score is your middle score. If your credit scores are 747, 751, and 722, your mortgage FICO score is 747. 747 would be used to price your mortgage. There has always been add ons to your mortgage rate depending on your mortgage risk. An add on is also known as a hit or adjustment.

But since the mess, there are even more. That is why your mortgage credit score is so important. One point difference can mean you pay a higher rate or higher costs. Your middle score or FICO score is used along with your equity position or loan to value to determine the add on.

For example on a refinance mortgage with 20% equity and a 720 FICO score, there would be a .250% add on. You can pay that upfront along with your closing costs or you can increase the rate to pay it.

However, if you still had 20% equity but your mortgage FICO score was 640, your add on would be 3.00%!

If you paid that at closing it would be more than almost all of your other closing costs and if you used the rate to pay it you would have to increase it more than a full point to cover the add on.

Some lenders do not even allow a mortgage credit score 620 or lower anymore. Others are even more conservative and not allowing anything below 640. If your mortgage credit score is on the low side, you have 2 hurdles. One is the expense of a low score and the other is getting through underwriting.

If there are 2 of you on the mortgage, the lowest middle credit score is used. If your credit scores are 723, 718, 736 but your spouse’s scores are 651, 682, 663, your mortgage FICO score is 723 but your spouse’s is 663. 663 is the score used for pricing because it is the lowest of the middle scores.

FHA mortgage credit score requirements are a little broader. The add on amounts are much less than the Fannie Mae mortgage we discussed above for the same credit scores. Unlike some lenders with a Fannie Mae or conventional mortgage who let you go lower than a 620 score, the FHA mortgage credit score stops at 620. You need more than a 620 credit score to get an FHA or VA mortgage.

Mortgage Loans Credit Score Enhancer

To improve your mortgage credit score, try these tips. First, have at least 3 open accounts with a balance. That could be a mortgage and 2 credit cards or if you do not have a mortgage, a car loan and 2 credit cards.

Credit repositories like accounts for mortgages and car loans because they have a repayment term. They are called installment loans. They like credit cards less because there is no ending.

You need 3 open accounts but try not to go much past that. Your mortgage credit score goes down when you have too many open accounts.

For your credit cards, try to keep the balance from going past 50% of your credit limit. Your score goes down when your balances are too high. Also, pay more than your minimum payment. Again, your mortgage credit score lowers if you are not paying down the balance. And most importantly, do not pay late.

Start by knowing your score:

It will give you an idea what your mortgage credit score is.

740 or more is an excellent credit score
700-740 is a good credit score
660-700 is a fair credit score
620-660 is a poor credit score

After you get an idea of what your credit scores are, check out our rate quote service. You can get 4 quotes from the nation’s top lenders fast.

Author: Terri Ewing

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