Mortgage Credit Score vs. Consumer Credit Score

Have you ever checked your credit score?

You may have received a credit score from one of these sources:

1. Your credit card company.
2. A free site, such as Credit Karma or Credit Sesame.
3. One of the credit bureaus: Experian, Equifax, or TransUnion
4. Your mortgage lender.

Don’t be surprised if the score you got from your mortgage lender was different from your score you obtained elsewhere. Why the difference? And, which score is correct and true?

To answer these questions, let’s look at some quick facts.

CREDIT SCORE FACTS

• FICO stands for Fair Isaac Credit Corporation, the creator of credit scores used by mortgage companies and other lenders. Mortgage pros say “credit score” rather than the full “FICO credit score.” It’s the same thing, whether you say “credit score” or “FICO score.”
  
• Your mortgage credit score is the one used to qualify you for a mortgage loan. It is a stricter grading curve than the scoring system used by credit cards. This makes sense, because it’s less risky to lend someone a few thousand on a credit card versus $250K or $500K on a mortgage. Thus, your mortgage score is likely to be lower than other types of credit scores.
  
• The consumer credit score, the ones used by credit card companies, is more lenient and typically higher than the mortgage score.
  
• When you use Boost to boost up your credit, it can help your Experian credit card score, but it does nothing for your mortgage score. Nor does it help your scores with Equifax and TransUnion.
  
• Vantage Score is a completely different scoring system than any other. The big three credit bureaus collaborated to create a more accurate and inclusive credit score algorithm. Currently, the mortgage industry does not use Vantage scores, but that will be changing in 2024-2025.
  
• CreditKarma and other independently-owned sites have their own guess at how scores are calculated. They do not have the “secret recipe” used by the credit bureaus. Thus, any score you get from them could be wildly OFF. They are only useful for seeing if your score is trending upward or downward.
  
• Insurance companies have a different credit scoring system designed for themselves. It can be impossible to learn what your insurance score is, other than a general “excellent,” “good,” “fair,” or “poor” rating.
  
• Currently, mortgage scores are based on FICO version 2, 4, and 5. They plan to update in the next year or two.
  
• Credit card companies most often use FICO version 8, 9, 10, or Vantage score.
  
• FICO 10T is FICO 10 with Trended Data added in. Trended date is credit score AI that looks at your behavior and activity, not only your payments and balances. Mortgage lenders will use FICO 10T in the next year or two.
  
  This is all interesting, but you don’t need to memorize the FICO versions. You only need to know how to manage your finances and credit so that you earn a top tier credit score.
  
  Having a credit score over 740 gets you the best mortgage interest rate on a conventional (best) home loan. Having a 800 score is the icing on top that gets you the highest respect. Some lenders, such as Provident Wholesale, reward people with a 780 – 800+ score with an even lower interest rate. (You get a wholesale loan through a mortgage broker, not a bank or credit union.)
  
  I hope this info is helpful. There’s a lot more to credit scoring. If you’d like to become an expert on how credit scoring works and how to earn a top tier credit score in the shortest time possible, then I can recommend these two publications:
  
  1) Build and Protect Your Credit Like the Pros here
  2) Credit Repair Mindset here
  
  If you have any questions on credit scoring, please feel free to add a comment. I see each and every comment, usually within an hour or two. If it’s the middle of the night on the Pacific Coast, then please give me longer.