When looking to buy a new home, having a good credit score can go a long way. However, many prospective homeowners don’t know that they have more than one credit score. Lenders use a different one depending on what kind of loan you want.

So, what FICO score do mortgage lenders use, and how can you improve your credit scores before applying for a loan? Any leading mortgage broker in Houston, TX would be able to tell you the differences and the best steps for credit score improvement. Read more to learn which FICO credit score you should check.

What Makes a FICO Score

The Fair Isaac Corporation (FICO) developed credit score systems that, reportedly, over 90% of major lenders use to assess how worthy a person is to receive a loan. FICO scores calculate and enumerate various factors which have different amounts of influence on the score:

·Payment history accounts for about 35% (High)

·Debts from loans or credit account for about 30% (High)

·Median age of credit history accounts for about 15% (Medium)

·Different types of credit lines account for about 10% (Low)

·Amount of new credit lines accounts for about 10% (Low)

FICO adds these weighted factors together to produce a credit score that generally sits between 300 and 850, with 670 usually considered fair. Prospective homeowners with scores above 670, of course, usually have more mortgage loan options than those with lower scores. Everything about your mortgage options, from the interest rate to the length of the mortgage, can come down to your score.

Different Types of FICO Scores

FICO has 10 different credit scores that various industries use to determine your eligibility. The credit scores slightly alter how they add together, changing the percentage of effect each score component has. Mortgage lenders do not use all 10 FICO scores, so what FICO score do mortgage lenders use?

Although FICO 8 has become more popular and all three major credit bureaus use it, mortgage lenders tend to look at the scores almost exclusive to each bureau:

·Equifax: FICO 5, or Equifax Beacon 5

·Experian: FICO 2, or the Experian/Fair Issac Risk Model v2

·TransUnion: FICO 4, or the TransUnion FICO Risk Score 04

Their calculations vary slightly, so if you’ve seen your FICO scores through your bank app or account, they may change depending on which score they show. For example, your ability to repay a loan for a house differs from your ability to repay credit card debt.

To give yourself a better chance of mortgage loan approval, you may want to try choosing a lender based on the highest of the three credit scores.

How to Improve Your Score

To improve your credit score, you need to look at the percentages the five factors take up in it. For example, if your score relies more on your payment history than how much revolving credit you have, pay back your debts on time and continuously. The score is more likely to rise from consistent payments than selling your items or getting another credit card.

Learn More About Your FICO Score

Do you need more time to improve your credit score for FHA loan approval? Are you unsure whether you should use the Experian FICO score or the Equifax one?

You don’t have to tackle these questions alone. At Champions Mortgage, our brokers do their best to secure deals for beautiful, long-lasting properties. Find the best deals so you can take this next step in your life.

What FICO score do mortgage lenders use in your area? Contact Champions Mortgage at (281) 727-2500 or visit our contact page to start your application today.