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What Credit Score Do Mortgage Lenders Use?

Updated: Apr 20, 2023

Ever checked your credit score on Credit Karma and thought you are ready to buy a home, only to find out you weren’t even close?

You might start to think something must be wrong with Credit Karma, but I assure you, there’s not.

In fact, Credit Karma is one of the top companies today, helping Americans control their debt, free of charge.

So if it’s not Credit Karma, what could it possibly be, why is this happening to you, and how often does this happen?

Well, believe it or not, it happens more often than you think because most people don’t realize, mortgage companies use a different credit score model to determine loan approval.

But first, let's discuss the credit score that you see when you use a credit monitoring service.

What credit score do I see?

You see your consumer score in credit monitoring app, but what do mortgage lenders see
You can monitor your credit score, but when it comes to your report mortgage lenders see something different.

If you're using a credit monitoring service like Credit Karma, you are looking at your Vantage Score 3.0 credit score, which is the latest version of your Vantage Score.

A Vantage Score is a credit scoring model widely used as a base score to help consumers understand their borrowing power.

The latest version of Vantage Score has been aligned with the latest Fico. Therefore, when you're looking at your Vantage Score on Credit Karma, you are in essence looking at your Fico score.

However, because this is not an industry-based score, you should only use it to get an overview of your borrowing power.

When it comes to making more substantial purchases like a home, it would be in your best interest to view your credit report.

To get your industry-based Fico credit report visit:

Remember, you’re entitled to 1 free credit report a year.

What credit score is my mortgage lender seeing?

A house that is waiting to be purchased by a buying that wants to know what score mortgage lenders of using.
When buying a home, it's important to know what mortgage lenders see and why?

Now here’s the kicker, while most financial institutions, lenders, and credit bureaus use the latest version of your Fico score, mortgage lenders don’t, in fact, they use much older versions of your Fico score.

And if that wasn’t enough of a shocker, each bureau uses a different version of that older model.

  • Experian uses Fico Score 2 or Model v2

  • Equifax uses Fico Score 5 of Beacon 5

  • Transunion uses Fico Score 4 or Risk Score 4

Remember, there are about 16 different models of your credit score. So, which factors make up each of these versions?

Believe it or not, the factors that make up all these credit scores are the same. But it’s how these reports are consolidated and used that makes the difference.

When it comes to purchasing a home, lenders need a more in-depth overview of your borrowing habits, that’s where your RMC report comes in.

Now, this consolidated report contains additional information you won’t find on the credit report you receive, in fact, the only way to see this report is when you apply for a mortgage and you receive it with your closing packet.

This doesn't mean that you're in the dark, as I stated above, this larger report is made up of the 3 smaller reports, so use that information to help you come up with a strategy to improve your credit.

My shows you the older versions of Fico scores lenders use to make up your RMC report.

Other Factors to Consider

By now you’re wondering, why all the compiling and mystery?

Consider this, mortgage lenders are about to loan you an enormous amount of money, they also have to abide by the loan program you may be applying for.

If they mess this up, they could be responsible for a huge amount of money going down the drain, so believe me, they are going to be thorough.

Therefore, on top of the compiled credit report, the residential mortgage report will provide additional details like your employment history and your current income.

They will then ask you to provide other financial records, including investment and retirement accounts, recent bank statements for at least 3 months, tax returns, and pay stubs.

If you have anything you need to explain on your credit report, I would have those letters of explanation handy as well, just in case they ask.

Purchasing a home requires more than just a good credit score, in fact, your credit score is just a smaller factor in the scale of others things you need to consider. Use this chart to help.

Factors that determine home loan approval

Credit score is not the only factor that goes into a home loan approval.
Now all the factors that go into a home loan approval.

How do I raise my credit to buy a house?

Now that you know all the factors that go into buying a home, you don’t want to stress yourself by overthinking the process.

If you focus on raising your credit score and practicing good spending habits, all the other factors will fall into place.

Working on your credit helps you to work on the other factors that go into home loan approval.
Work on raising your credit score and the other home loan approval factors will fall into place.

So first,

  • Get your credit report

  • Dispute inaccurate information

  • Pay down your debt, including unpaid collection accounts

  • Pay your bills on time

These are the basics in helping raise your credit score.

This strategy will also help to keep your debt-to-income ratio in check. You can read more tips in the article, “Increase Your Credit by 50 Points, Here’s What I did!”

Get a free Credit Boost Checklist, here.

But what if you have a high credit score and just want more of a sure chance:

  • Don’t change jobs senselessly

  • Save money for the down payment and closing cost

  • Don’t apply for a home unless you are truly ready

  • Research the general area you desire to live in

Major Take Away

Homeownership is not impossible and although mortgage lenders use a completely different credit score model than other lenders, you still have the power to control the outcome of your journey.

Just remember to practice good money habits and stay informed on what’s happening with your finances.

Do this and you’ll have the keys to your new home in no time.

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