Understanding Mortgage Credit Scores

Your credit report is separate from your credit score, though the score is developed from the report. In addition to viewing credit reports from the three major reporting bureaus, you also should obtain your FICO score. Your score is like a report card. Fair Isaac & Co. (the FICO score keeper) assigns you a number based on the information in your credit report. Since there are three credit-reporting bureaus, you have three FICO scores. Here are the scoring factors:

Credit Checklist

  • Payment history — Have you paid your bills on time?
  • Amounts owed — What is your overall debt?
  • Length of credit history — How long have you been borrowing money? Mortgage lenders like to see a long credit history.
  • New credit — Have you applied for new credit?
  • Types of credit used — Lenders like to see all kinds of credit types: bank cards, car loans, student loans, and more.

What’s an A+?

The FICO scores range from 350 to 850; an 850 is the Holy Grail of credit scores and 723 is the median score in the U.S., but you can expect good mortgage interest rates at the 720 to 760 level and up.

For anecdotal evidence of your good credit standing, if you notice you are receiving a lot of zero percent credit card or lines of credit offers, you are probably in pretty good shape.

Homebuyers who pursue an FHA loan, one of the most common loan types for first-time purchasers, can usually secure a loan if their credit is 580 or over.

Most mortgage lenders use FICO as their means of determining your interest rate and the types of loan you qualify for; as interest rates creep up, this difference can be significant.