When it comes to getting a mortgage, your credit score is one of the most important factors that lenders consider. Your credit score is a number that reflects your creditworthiness, and it is used by lenders to determine how likely you are to pay back your loan on time. But what credit score do mortgage lenders most commonly use? In this article, we’ll take a look at the answer to that question.
The Most Commonly Used Credit Score
The most commonly used credit score by mortgage lenders is the FICO score. This score was created by the Fair Isaac Corporation, and it is used by many lenders to determine whether or not to approve a mortgage loan. The FICO score ranges from 300 to 850, with a higher score indicating a better credit history and a lower risk to the lender.
While the FICO score is the most commonly used credit score by mortgage lenders, there are other credit scores that lenders may use as well. For example, some lenders may use the VantageScore, which was created by the three major credit bureaus (Equifax, Experian, and TransUnion). However, the FICO score is still the most widely used score in the mortgage industry.
Why is the FICO Score the Most Commonly Used?
So why do mortgage lenders prefer to use the FICO score over other credit scores? There are a few reasons for this. First, the FICO score has been around for a long time, and it is well-established in the mortgage industry. Lenders are familiar with the FICO score and know how to interpret it.
Second, the FICO score is based on a formula that takes into account several different factors, including your payment history, the amount of debt you have, the length of your credit history, and more. This formula has been refined over the years to make it as accurate as possible in predicting credit risk.
Finally, the FICO score is widely available to consumers. You can obtain your FICO score from any of the three major credit bureaus, and many credit card companies and other lenders now offer free access to your FICO score as well. This makes it easy for consumers to monitor their credit score and take steps to improve it if necessary.
What Credit Score Do You Need to Get a Mortgage?
So what credit score do you need to get a mortgage? The answer to that question depends on the lender and the type of mortgage you are applying for. Generally speaking, you will need a FICO score of at least 620 to qualify for most conventional mortgage loans. However, some lenders may require a higher score, particularly if you are applying for a jumbo loan or a loan with a low down payment.
If your credit score is below 620, you may still be able to get a mortgage, but you will likely need to work with a lender who specializes in working with borrowers with lower credit scores. You may also need to provide a larger down payment or pay a higher interest rate.
How Can You Improve Your Credit Score?
If you are looking to improve your credit score in order to qualify for a mortgage, there are several steps you can take. First, make sure you are making all of your payments on time. Late payments can have a negative impact on your credit score.
Second, try to pay down any outstanding debt you have. The amount of debt you have relative to your available credit (known as your credit utilization) is an important factor in your credit score. Aim to keep your credit utilization below 30%.
Finally, avoid opening any new credit accounts or taking on any new debt in the months leading up to your mortgage application. This can have a negative impact on your credit score and make it harder to qualify for a mortgage.
Conclusion
When it comes to getting a mortgage, your credit score is a critical factor that lenders consider. The most commonly used credit score by mortgage lenders is the FICO score, which ranges from 300 to 850. To qualify for most conventional mortgage loans, you will need a FICO score of at least 620. If your credit score is lower than that, you may still be able to get a mortgage, but you may need to work with a specialized lender and provide a larger down payment or pay a higher interest rate. By taking steps to improve your credit score, you can increase your chances of qualifying for a mortgage and getting the home of your dreams.