What does your lender make of your FICO score?
Lenders tend to break down the credit score range for services into “buckets” or brackets. These brackets may vary from a few points to a spread of 10 points. This means that even a difference of 1 point can change your credit score range jumping you up or down in the eligibility game. Although this may be unfair in many cases it is a practice that is here to stay. Each point on your FICO score can turn out to be a critical factor in your credit score range. It may surprise you to know that there are many different kinds of FICO scores. Different FICO models emphasize different criteria in their analysis. The reasons for that are covered in my more advanced articles when you are ready to dig deeper. The score you can purchase from FICO is frequently only a starting point for a more nuanced score customized to the lenders specifications.
If you are applying for a credit card or auto loan there will usually be only one credit score pulled. It is important to correct errors at all 3 bureaus because you never know which credit reporting agency a lender is going to use! For a mortgage loan the lender will get all 3 reports together in what is called a “tri-merge” report. A single negative entry at any bureau will not be overlooked in a tri-merge report. This variation in your FICO score is known as your “Mortgage score.”
Learning your FICO score won’t tell you where your lender draws the lines. Lenders use different cut offs and there may be several tiers of interest rates offered to those with scores between 620 and 760. Below 620 and you will have difficulties with anything but “sub prime” loans. After you reach 760 you are eligible for the best rates everywhere. Anything higher than 760 is just for show. Being even higher than 760 does give you a nice cushion against unexpected adversity if you can achieve such a high score.
Where do Lenders Draw the Lines?
Few lenders will tell you where they draw the lines. Frequently there is some elasticity for other things that are important such as income, longevity on the job and most important of all in the case of a mortgage the size of the down payment. Most mortgage lenders pull all 3 of your credit scores and use the middle one. All borrowers should bear in mind that even a few points on your credit score can be very important. Even a single point may determine if you make the cut for a better rate or get the loan at all. A single point can make the difference in the cut off to the next tier of credit.
credit score range can be affected by even 1 point!