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Mortgage Qualification: What Is a FICO Score and What Is It Used For?

Updated on February 6, 2010

When it comes to qualifying for a mortgage, your FICO score will determine not only thetype of home loan you qualify for, it determines if you qualify at all. If you do, it will also determine the interest rate of your home loan, which ultimately determines what your monthly mortgage payment will be.

Credit Score Needed to Buy a House

Since the foreclosure crisis of 2007, the credit score needed to buy a house has inched up. Proof? According to the Home Buying Institute (

Fannie Mae recently increased their minimum credit score requirement from 580 to 620. So if mortgage lenders want to sell their loans into the secondary mortgage market (through Fannie Mae), they'll expect buyers to have a score of 620 or higher. Of course, that's just what is needed to get approved. You'll need a much higher score to get the best rates, probably north of 760.

What Is a FICO Score (Credit Score)?

It's a number that lenders use to help them decide the answer to the following question:

"If I give this person a loan, how likely are they to pay it back on time?"

The higher your FICO score, the lower the risk to lenders. Hence, you will receive a better interest rate – on everything from home loans to car loans. FYI, FICO scores range from a low of 300 to a high of 850 or 900, depending on which credit reporting agency you get it from.

When I was a mortgage consultant and conducted home buying seminars, I advised potential homebuyers to find out what their FICO scores were before they began to look at houses. Why? Because there can be some surprises on there. You can think that you have perfectly good credit, only to be turned down for a home loan because of negative items on your credit report that you didn’t know about.

Worse, the items could not even be yours. But, you have to get them off before you can be approved for a home loan because this is what lenders use to determine home loan eligibility.

How to Find Out What Your FICO Score Is

To find out what your FICO score is, you have to order your credit report. Following are two reputable websites you can order from. Prices vary and I don't recommend one service over another because all information in your credit report will come from the same database at each agency.

Credit Report Ordering Tip: Order ALL 3 credit reports WITH YOUR FICO SCORE, not just one. Why? Because scores vary from one credit reporting agency to another. For example, you may have a 720 FICO score at Experian, and a 680 at Equifax. So you need to know what your score is from all three of the major credit reporting agencies, which are listed below by the way.

How to Order Free Credit Reports

Listed below are the names and addresses of the three major credit reporting bureaus. You can call or write and request a free report from each agency. Most states have a law that entitles consumers to at least one free credit report per year.

Remember, free reports do not include FICO scores.

P.O. Box 2002
Allen, TX 75013
PH: 888-397-3742

P.O. Box 1000
Chester, PA 19022
PH: 800-888-4213

P.O. Box 740241
Atlanta, GA 30374-0241
PH: 800-685-1111

Note: If you're contacting the companies from outside the U.S., it's best to do so via their websites.

What's In a Credit Report?

Credit reports basically contain your entire credit history, ie:

Name of Account (eg, Visa, Mastercard, Macy’s, Kay Jeweler’s, etc.)

How Long It’s Been Open

Payment History (including late payments)


Judgments (eg, if a creditor has sued you and gotten a judgment against you)

Amount Owed on Account

Closed Credit Accounts

Balance Owed on Account


And this is why the answer to the question, “What Is a FICO Score and What Is It Used For?” is so pertinent when it comes to buying a home. Lenders can tell a lot about how you handle your personal finances – and hence how likely you are to default on a home loan – from your credit report.

Buying a house is one of the biggest - if not the biggest - financial decision you will ever make. Knowing what's in your credit file is critical to making sure that you get the best loan product you are entitled to. So, do your due diligence and order yours today.

Note: When I was a loan officer, I recommended that all consumers check their credit reports at least once a year; active credit seekers (eg, those shopping for a home loan or car loan for example) should probably check their reports every six months.

Have Bad Credit? Want to Buy a Home?

The good news is that you can repair your credit. And, all the tools you need can be right at your fingertips in a matter of minutes.


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