Your credit score is one of the biggest factors in your mortgage rate. But the score you see on your phone app may not be the score your lender uses. Here's what you need to know.
Which scoring model do mortgage lenders use?
Most mortgage lenders use FICO Scores 2, 4, and 5, pulled from the three major credit bureaus (Experian, TransUnion, and Equifax). Your middle score is used for qualification. These models are older than the FICO 8 or FICO 10 you might see on Credit Karma or your bank's app.
This means you could see a 740 on a free monitoring tool and get a 710 from your lender. Don't panic. The important thing is understanding where you fall in the rate tiers.
What credit score tiers affect your rate?
How to improve your score before applying
Pay down credit card balances. Your credit utilization ratio (balance divided by limit) accounts for roughly 30% of your score. Getting utilization below 10% on every card makes a measurable difference within 30-60 days.
Don't close old accounts. Account age matters. Keep your oldest cards open, even if you rarely use them. Closing them shortens your credit history and reduces your total available credit.
Avoid new credit inquiries. Each hard inquiry can ding your score 5-10 points. Don't apply for new credit cards or car loans in the 3-6 months before your mortgage application.
Dispute errors. Pull your reports from all three bureaus and dispute anything inaccurate. Errors are more common than you'd think.
Ask for credit limit increases. A higher limit with the same balance lowers your utilization. Ask your existing card issuers, not new ones.
From Austin
"I've seen borrowers improve their score 40-60 points in 60 days with targeted moves. It can literally save them thousands of dollars over the life of their loan. But you need to start early."