You may have heard of FICO scores, but FICO mortgage scores are a slightly different beast. How do mortgage credit scores differ from standard credit scores, and how do you improve your FICO mortgage score?
Read on for an explanation of what mortgage scores are and what you can do to boost yours so that you can get the best possible deal when you buy a house or apartment.
Table of Contents
- 1. Make sure you understand FICO mortgage scores
- 2. Dispute errors on your credit report
- 3. Pay all your bills on time
- 4. Pay down your current debts
- 5. Remove negative marks in your credit history
- 6. Build up good credit before submitting your mortgage application
- 7. Request rapid rescoring from your mortgage lender
- 8. Don’t sabotage your progress
1. Make sure you understand FICO mortgage scores
FICO, the major credit scoring company in the US, has developed several credit scoring models that are unique to each major lending industry. One of these, of course, is the FICO mortgage score.
To make things a little more complicated, each credit bureau has its own FICO mortgage score. This means that you actually have three different FICO mortgage scores, as shown in the table below.
FICO Scores Used for Mortgages
| Base FICO Scoring Model | Alternative Model Name | Credit Bureau (Source) | Score Range (Source) |
|---|---|---|---|
| FICO Score 2 | Experian/Fair Isaac Risk Model v2 | Experian | 300–850 |
| FICO Score 4 | TransUnion FICO Risk Score 04 | TransUnion | 300–850 |
| FICO Score 5 | Equifax Beacon 5 | Equifax | 300–850 |
Source: Experian.
Although the standard FICO scoring model is still popular among lenders in a variety of industries, the vast majority of mortgage lenders use a mortgage-specific credit score (based on an older non-industry specific model, i.e., FICO Score 2, 4, or 5). 1
Thankfully, every FICO score version is calculated based on the same basic formula, with just a few small adjustments. 2 This means that to raise your FICO mortgage score, you’ll follow the same basic steps for improving your credit score in general, which we’ve listed below.
How to get your mortgage credit score and track your progress
As you implement the steps below, you may want to keep tabs on your progress. You can check your FICO mortgage score by purchasing your credit score straight from FICO. You’ll have to buy one of FICO’s subscription plans or one-time reports.
If you want to know all three of your FICO mortgage scores, you may need to purchase a 3-bureau credit report or 3-bureau credit monitoring.
If you get your FICO score elsewhere, be sure to read the fine print. Although there are plenty of other ways to check your credit score and even get your FICO score for free, not all credit scoring products will display your FICO score for mortgages.
What’s the minimum FICO score required to get a mortgage?
You can get an FHA (government-backed) mortgage with only a 500 credit score. However, conventional mortgages usually require a FICO score of at least 620—a cutoff imposed by Fannie Mae and Freddie Mac, two leading mortgage buyers in the US. 3 4
With that said, there’s no universal minimum credit score needed to buy a house. This is because credit score requirements vary depending on the mortgage company and the type of home loan you’re applying for.
To get the best chance of approval and the best loan terms, optimize your credit health as much as possible before applying for a mortgage.
2. Dispute errors on your credit report
Credit reporting errors are surprisingly common (affecting 20% of consumers!), and they can make a huge difference to your credit score and your mortgage options. 5
If a mistake on your credit report is bringing your credit score down, then disputing it can rapidly increase your credit score. Here’s how to dispute credit report errors:
- Get copies of your credit reports from all three credit bureaus (Experian, Equifax, and TransUnion). You can do this for free at AnnualCreditReport.com.
- Identify errors and highlight them. Gather evidence that the information is inaccurate.
- Send a credit dispute letter (below) along with your supporting documents to the relevant credit bureaus.
- Check your credit reports again after 2 months to ensure that the error has been removed.
It will take no more than 30–45 days for the credit bureaus to process your dispute. 6 If they can’t verify that the information is correct, they’re required to remove the information within this timeframe.
3. Pay all your bills on time
It probably seems obvious, but it’s still worth repeating: a strong history of on-time payments will increase your mortgage credit score and boost your odds of getting approved for a home loan.
It’s a good idea to make sure that you have at least a full year of 100% on-time payments before applying for a mortgage. If you have any recent delinquencies in your credit history, this means waiting until they’ve aged.
Your payment history is the most important factor influencing your credit score, and it’s a huge consideration for mortgage lenders. Because mortgages are such a major financial commitment, they need to feel confident that you’ll actually make your payments on time and in full.
4. Pay down your current debts
The amount of debt you have is a major factor influencing your credit score. Reducing your balances on your credit cards and loans is a quick way to raise your FICO mortgage score.
Start by making sure your credit card balances don’t go over 30% of your credit limit (even less is better). If you have other loans, it’s also worth paying them down as much as possible to improve your debt-to-credit ratio.
- For optimal credit health, keep your credit utilization ratio as low as possible.
How much debt you have will also affect your mortgage application in other ways. In addition to influencing your mortgage credit score, it’ll impact your debt-to-income ratio, which is a major non-credit factor that lenders look at when reviewing home loan applications.
5. Remove negative marks in your credit history
If you have any derogatory marks in your credit history (e.g., late payments, collections, or repossessions), then removing them is a guaranteed way to quickly improve your mortgage credit score.
Here are the most effective ways to remove negative items from your credit report:
- Pay for delete: Use a pay-for-delete letter template to ask a creditor or debt collector if they’ll agree to remove a negative mark in exchange for payment toward an outstanding debt.
- Goodwill deletion: Use a goodwill letter template to ask a creditor to delete black marks like late payments from your credit report.
These approaches aren’t guaranteed to work, but if they do, your credit score should rapidly improve. This is because most creditors update consumer account records with the credit bureaus at least once every 30–45 days. 7
It’s also worth noting that fixing your credit before buying a house isn’t just about repairing a damaged credit score. Certain black marks in your credit history can completely eliminate your chances of getting a mortgage, as shown in the table below.
Negative Marks That Will Disqualify You from Getting a Mortgage
| FHA Loans | VA Loans | USDA Loans (Streamlined Processing) |
|---|---|---|
Needless to say, if you have any of these marks, prioritize trying to get them removed (but again, unless they’re outright mistakes, remember there are no guarantees).
6. Build up good credit before submitting your mortgage application
Building up your mortgage credit score is a lot like building credit in the standard scoring models: you’ll need to lengthen and strengthen your credit history.
Try these tips for building credit to buy a house:
- Become an authorized user: Getting someone with a good credit score to add you as a credit card authorized user is the best way to build credit fast right before you apply for a mortgage. If done correctly, their full payment history will be added to your credit report.
- Take out a credit-builder loan (at least 1 year in advance): If you have time to spare, consider taking out a credit-builder loan at least 1 year before you plan to apply for a mortgage. If you’ve never taken out a loan before, then this will be particularly helpful for boosting your mortgage credit score and making you more attractive to lenders.
The first approach will build your score quickly, but most credit-building methods take time and dedication. Nevertheless, building credit before applying for a mortgage is always a good idea, and it may be necessary if you have an insufficient credit history.
7. Request rapid rescoring from your mortgage lender
Your credit report and credit score only update once your creditors update your account records—usually every 30–45 days. 7 However, mortgage lenders have the power to speed up this process through a service known as rapid rescoring.
This is your best option if you need to increase your credit score quickly so you can get a mortgage. Rapid rescoring can get you a newer (and higher) mortgage credit score in just 2–3 days. 9
However, rapid rescoring will only increase your FICO mortgage score if you’ve already taken measures to boost or fix your credit, so make sure to use all the credit hacks and credit repair strategies you possibly can before asking for a rapid rescore.
8. Don’t sabotage your progress
Improving your credit score for a mortgage will be difficult if you accidentally do things that damage your credit in the meantime.
Avoid doing the following things:
- Applying for other new credit accounts: This will trigger hard inquiries (credit checks that cause a small drop in your credit score). If you actually open a new account, it’ll also negatively impact the length of your credit history.
- Maxing out your credit cards: Overspending on credit cards is a big mistake in the months leading up to a new loan application. Spending up to your credit limit can even cause your credit score to drop by 120+ points. 10
- Closing credit card accounts: Even if you have a credit card you never use, keeping it open will add to your total amount of available credit. Closing the account, on the other hand, will cause a sudden drop in your credit score by increasing your credit utilization ratio.
All this goes to show that understanding how credit works and what affects your credit score is a crucial part of establishing and maintaining good credit health, especially if you have a mortgage application coming up.
