How Lenders Determine Which Mortgage Credit Scores To Use

This BLOG On How Lenders Determine Which Mortgage Credit Scores To Use Was UPDATED On June 30, 2017

We all know the importance in credit scores when it comes to the mortgage application process.

  • Many mortgage loan borrowers get confused and do not know why mortgage lenders require credit scores and credit reports from the three major credit reporting agencies. 
  • What are credit scores and which credit score do mortgage companies use in qualifying a mortgage loan borrower for a home loan.

Credit Reports And Credit Scores In Mortgage Process

When a mortgage loan borrower completes a mortgage application, the mortgage lender will pull their credit reports from the three major credit reporting agencies.

  • The mortgage lender with get three credit scores from each of the credit reporting agencies. 
  • Mortgage credit scores differ than regular consumer credit scores and are mainly used for qualifying mortgage loan borrowers for home loans. 
  • The three credit scores is for each mortgage loan borrower.
  • If a mortgage loan borrower has a co-applicant, there will be a total of 6 credit scores; 3 mortgage credit scores for each borrower.

Credit Reporting Agencies

Lenders will pull a tri-merger credit report on mortgage applicants. Each credit bureau has a separate credit score for each consumer. Lenders will use the middle credit score to qualify mortgage borrowers. Here are the three credit reporting agencies:

  • TransUnion
  • Experian
  • Equifax
  • Each credit reporting agency will have different credit scores for each borrower. 
  • The mortgage lender always uses the middle credit scores in qualifying for the mortgage loan borrower. 
  • For example, Lets use a case scenario where James Jones had a Transunion credit scores of 710, an Experian credit scores of 650, and an Equifax credit scores of 595.
  • Lenders will use the middle credit score.
  • Experian score of 650 FICO is the middle credit scores for James Jones and this is the credit score that will be used.

Co-Borrowers On Mortgage Loan

Now, the co-borrower, Jill Jones has Transunion credit scores of 680,

  • Experian credit scores of 620, and Equifax mortgage credit scores of 565. 
  • Jill Jones’s middle credit scores are 620.
  • James Jones middle mortgage credit scores are 650 and co-borrower Jill Jones middle scores are 620. 
  • Now what! 
  • Which mortgage credit scores will the mortgage lender use in calculating credit scores in this particular mortgage loan? 
  • The answer to this question is the mortgage lender will always use the lower of the two borrower’s credit scores. 
  • So in this case, the mortgage lender will be using the lower credit scores of Jill Jones, which is 620 FICO.

So out of a total of six mortgage credit scores, we now came to one credit score in qualifying for a mortgage loan.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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