What Credit Score Do Mortgage Lenders Use?

what role does a credit score play when

you get ready to buy a house now that's

a really good question in real estate

practice a lot of home buyers have

reached out to me say hey Andrew what

credit score is the lunar going to use

and what if I'm doing this with like a

co applicant perhaps my spouse or

significant other and their credit score

isn't quite as good let's take a closer

look at what credit score a lender is

going to use my name is Andrew Finney

and my passion is helping you make sense

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alright my friend let's take a closer

look at this a lot of people will come

to me and say Andrew you know I have

really good credit but my spouse's

credit isn't quite as good I'm my credit

score's maybe like 750 but my spouse's

is like 6 10 and I'm not certain because

aren't there like three different credit

scores in fact my friend there's

actually hundreds of credit scores so it

can get really confusing really quickly

the first thing to know is that there

are three main credit reporting bureaus

you have Equifax Experian and TransUnion

each of them will have their own credit

score model that they're using right now

to gauge your credit and that's when

sometimes you see hey you know I got

that credit score the 750 Andrew but a

different one said 700 and then there

was one of the 725 my spouse's said they

were down as low as 580 and then they

had a 600 and a 620 well this is really

important to gain insight and clarity on

because when we're wondering which

credit score a lender is going to use

they're going to use the middle score

but which one is it going to be off the

applicant with a higher score or the

applicant with the lower score and this

is why it's so important to have this

conversation now going into getting a

mortgage so that if you need to work on

your credit score you have the

opportunity to do it in real estate

practice it's generally best to reach

out to address the real estate adviser

three to twelve months in advance of

when you would like to be moving into

your new home just in case we need to do

some work with either your credit score

or your spouse's credit score the second

thing you should know is what role is

that crest we're going to play when you

do your mortgage application and this is

very very important to know if you do

have that credit score that's like 700

750 maybe some of you even have like 800

plus rock on

that's an awesome credit score clen day

I hope to be right there with you having

that eight hundred plus that being said

I get people that come into my office or

they call me on their phone they say hey

Andrew I have a 750 credit score so I

know I can get approved for a mortgage

of whatever I want not so fast you see

the credit score isn't a determining

factor and how much home loan you can

get it's a determining factor of what

credit risk you present to a prospective

lenders so when a mortgage lender looks

at your credit they're not gauging your

credit by how much home loan you can get

in reality what they're doing is they're

assessing what kind of credit risk you

provide in other words they're gonna

deep dive into your past history of your

credit report and they're gonna say hey

how many times has this person applied

for credit how many times is this person

over leveraging themselves what are

their debt to income ratios on their

credit cards signature loans or any

other types of loans that you have

they're going to take all of that into

consideration the role of the credit

score itself is which loan program

you're going to be able to qualify for

how many different loan programs are

going to be able to qualify for and what

mortgage interest rate will you be able

to get now obviously the higher your

credit score the better the loan rate

and terms that are going to be provided

to you because you've earned it because

you're a reduced credit risk to the

lender just want to be very very clear

that your credit score does not impact

how much home loan you can get it

impacts whether you can get qualified or

not as a credit risk factor so that's

why the mortgage lender is going to be

looking at all your different credit

reports and when they're looking at

which number to use they're going to use

the middle numeric number so going back

to our earlier example if you have a

credit score at 750 a 725 and a 700 the

mortgage lender is going to use the 725

score in the case of the spouse that may

have the 580 600 and the 620 credit

score they're going to use the 600 so if

both of you as joint applicants or to

apply for mortgage and your middle

numeric is 725 and their middle numeric

is 600 and you need a 620 the qualifying

do you qualify will you be able to get

that mortgage application approved and

that's a great question so what happens

is they're actually going to go off of

the lower of the two credit scores so

even though you may have a credit score

of 725 if your significant

there the person that you're doing a

joint application with has a 600 credit

score and a 620 is the minimum number

needed for the loan program that you're

working on then they're going to say hey

you know what we need a boost that

credit score up here's some credit

repair specialists I could put you in

touch with or let's deep dive into your

credit report together and see what we

can do to pay off some debts pay down

some debts and be able to boost your

significant others credit score from

that 600 marker to that 620 plus mark

awright so it's important to note that

the lender in short is going to go offer

the lower of the two middle numeric

numbers whenever you're doing a joint

application bring this up because it's a

very real factor for a lot of us in the

United States most of us that get a

mortgage are going on with another

person we need to make sure both of our

fiscal houses in order and both of our

credit scores are on tap and on par for

the mortgage application process the

third thing to know is that there are

hundreds of credit scores but the

lenders are going to use what they call

an RM c r and r MC r is essentially a

residential mortgage credit report or

essentially they will call it in short

try merge report which is much easier

for your lender to read and review

typically your r MC r is going to list

the three of your credit scores on all

of your credit report information and

because the scores can range from 300 to

850 on the top end then your scores are

going to fall somewhere within those two

boundaries as we well know right the

mortgage underwriting is going to be

based on the middle of those three

scores as we've already talked about so

women they're going to be reviewing this

it's important to know that's what

they're looking at so your credit score

if you were looking at Credit Karma

right now or one of the other services

available may show that your middle

numeric is a 725 from your significant

other as a 600 but the mortgage lenders

going to be looking at what's called

that tri merge report right and the

reason that this becomes important is

that with those hundreds of credit

scores out there your credit score for

applying for a mortgage could actually

be higher than what you realize because

there are hundreds of credit scores out

there so don't let that discourage you

the first step whenever you're looking

at purchasing a home or purchasing

anything is to get your ducks in a row

and ready to go well how do we do that

we identify the team that we're going to

need moving forward with our ambition

and our goal in mind so contact that

trusted real estate advisor get paired

up with a great local loan officer go

ahead and apply for that mortgage

application so we know where you are and

guess what where's K such a way

even if he if the mortgage application

gets rejected is what we have a game

plan of how the help you with a

realistic time frame and a goal and mine

with a timeline set hey if you take X Y

Z step because your credit score your

significant others credit score was a

six hundred fortunately we just need 20

points but if you do these three steps

we're gonna be able to help you get a

620 or higher in the next one the three

months or whatever the case may be work

with your team identify your team up

front if your mortgage application is

rejected do not get discouraged it's

just a matter of process everything in

life it requires a game plan

let's put yours together today so now

let's talk about five ways to improve

your credit fast and this steps that

you're going to need it take to get a

home loan looking forward to our next

conversation we'll see in a few