Dan Marchiando's Mortgage News Blog

What Credit Scores Really Matter?

November 12th, 2013 4:35 PM by Dan Marchiando

I frequently see articles and websites talking about the different types of credit scores available, and these articles usually say something like "...90 percent of mortgage lenders use the FICO score...". I've been in the mortgage business for about as long as FICO scores have been around, and I can say with some confidence that FICO scores are the only scores used by all conventional and government home mortgage lenders, for first mortgage loans. The majority of these first loans being originated today are sold to Fannie Mae or Freddie Mac, and these institutions only use the FICO credit score. Lenders obtain a FICO score from each of the three credit aggregating agencies or bureaus--Equifax, Experian, and TransUnion. The credit data and scores from each of the three bureaus are combined in a single commercial report called a "Tri-merge" credit report. These exact/same commercial reports are not available directly to consumers.

Other credit scores that you might be sold as a consumer are almost never FICO scores, and most often do not use the same numbering scale that FICO uses. So it can be somewhat like having someone telling you the temperature in Celsius, when all you can relate to is Fahrenheit.

TransUnion and its subsidiary TrueCredit sell consumers the VantageScore. Experian and their subsidiary Experian Direct sell the PLUS score to consumers. And Equifax mostly sells their proprietary "Equifax Credit Score". These alternative scores are sometimes referred to as "educational scores". Many of the websites that you can visit for scores will not disclose to you that the scores they sell are not the same scores that are used by mortgage lenders. The few that do, bury this disclosure in fine print that you really have to search for.

The only place where you can reliably purchase the FICO score as a consumer is through MyFICO. But the cost is fairly high ($19.95 for each of three different scores), so I don't recommend that consumers purchase their FICO scores unless they have a really compelling reason to do so. I do however recommend that consumers access their free credit reports through the website AnnualCreditReport.com. This is the legitimate site that the government required the three credit bureaus to create for the benefit of consumers in 2004. Because these free reports are available to consumers, I also don't generally recommend the various (and expensive) credit monitoring services.

If you have any questions about any of this, give me a call or shoot me an email--I'm happy to help and I'm never too busy for your questions. And as always, I greatly appreciate your referral of friends and family.

Thanks for your interest,

Dan Marchiando

Posted in:General
Posted by Dan Marchiando on November 12th, 2013 4:35 PM