What Mortgage Lenders Use FICO 8?

When getting your credit score checked, your credit history, payment history, and other factors are considered. This is all done to ensure that you’re eligible for a mortgage lender’s loan requirements. 

The majority of mortgage lenders use FICO 8. All major and minor mortgage lenders use FICO 8. Since its origin in 1956, FICO has made multiple installments, and the FICO 8 credit check is the most recent one.

We’ll explain how FICO 8 works and what differentiates it from other FICO versions throughout this article. We’ll even give a few tips on how to improve your credit score via FICO 8.

By the end, you’ll have the confidence needed to get the best FICO 8 scores so a mortgage lender can approve you. 

What Mortgage Lenders Use Fico 8

FICO 8 is the eighth installment of the FICO credit score check. It is consistent with its credit analysis but has more unique features associated with it. The mortgage lenders that use fico 8 come from private or public organizations. 

Like previous FICO versions, FICO 8 is used to determine how effectively a borrower interacts with their debt. The scores are higher for borrowers who can pay off debt, complete their pay balances, and open new accounts.

Lower scores are for people who are delinquent on their payments or frivolous credit activity. It ignores collection accounts under $100. FICO 8 includes a higher sensitivity to a credit line. This means that this system takes your credit-to-debt ratio and credit utilization more importantly when calculating your score. 

Because of this, credit users should get their credit utilization score below 30%. FICO 8 is the more forgiving credit check system as it forgives the late on-off payments that are more than 30 days. FICO 8 also comes with two subdivisions:

1. FICO 8 Bankcard – Checks the creditworthiness of new credit cards.
2. FICO Auto – Checks auto loan creditworthiness.

What Factors Into Your FICO 8 Score?

Amounts Owed

This accounts for up to 30% of your total score and reflects on what you owe through your credit cards and loans. Make sure that you have a low credit balance, as your score will slightly increase. 

Credit History Length

Credit History Length takes up 15% of your total credit scoring. Having credit cards for a longer period helps make your credit more appealing to mortgage lenders. 

Payment History

Taking up 35% of the entire credit score, Payment history is the simplest way to establish a line of credit. Avoid missing payments because a single late payment can harm your score. 

Credit Mix

Your credit mix accounts for 10% of your total score. It shows mortgage lenders that you can have credit cards and installment loans. 

FICO vs. Previous Versions

FICO has gone through iterations of financial change throughout its creation. In comparison to other previous versions. 

If you pay your bills on time and make a mistake once in a while, it won’t be affected that much on a FICO  credit report. It acknowledges that the credit borrower that your score would not 

become lower than expected.

People who make multiple missed payments will have a reduced score through FICO 8. So don’t make a habit out of the off payments. Paying your bills on time will get your score back up slowly. 

But, if you have a high-balance credit card, the FICO 8 would penalize you. Make sure that your individual balance is low in relation to the other credit limits. 

How To Increase My Fico 8 Scores? 

Getting your FICO 8 score increased lies in your financial awareness, ability to check your reports, and timing. If you’re looking for some tips on how to increase your FICO 8 scores, keep reading.

Paying Credit Accounts on Time

As stated earlier, your credit card is The FICO 8 Credit report system takes multiple paid payments into account. That means that if you are able to pay your monthly bills, you’ll have a better score over time. Even if you’re not able to pay off the card in full, the monthly minimum payment will keep it in good condition. 

If you have difficulty making the minimum payments, you’ll have to get automatic payments in your credit account, so you’ll always remember your payments.

Just make sure you have a sufficient amount of money in your bank to protect your account from lenders. 

What If My Credit Account Has Been Sent To Collections?

Having your credit accounts go to collections can have a devastating impact on your score. Since the credit impacts your financial reputation and health, you have to fix the credit issues held with lenders. 

While it is complex, start by getting a debt verification letter. Let’s face it; banks sell your loans to a third party. This will ensure that you’re paying the correct lender.

Optimize Your Credit Mix and Credit History

As your credit account ages over time, your credit score will increase. This means that having an established account will show that you have utilized your credit for longer, making you a more experienced borrower. 

Having multiple credit accounts is a good thing. You just have to make sure that you pay them on time. The number of times hard inquiries were made on your credit is also important. So try to reduce your credit checks to ensure you’re getting the best FICO 78 score possible.

View Your Credit Reports

It’s mandatory to check your credit report every now and then. You’ll want to do a soft credit check as it allows you to view your credit score without docking you any points. Remember, while some sites can view your credit for free, it’s best to try through the official site. 

After your FICO 8 scores have been calculated,  you must check their reports for accuracy. If you notice any errors, speak to the bureau and verify that your credit info is correct. You’ll make more positive increases in your score by reporting credit mistakes.

Conclusion

To conclude, mortgage lenders will use the FICO 8 to see if you’re a responsible borrower. By giving them your verified credentials, paying off your accounts, and establishing a positive credit history, you’ll increase the chances of obtaining a loan.