Dear myFICO,
We're working hard to get our finances in shape to buy a home, and we want to get the best interest rates possible. Which scores and credit reports will the lender check when we apply for a loan? Will they look at all of the 3 main credit bureaus? We'll also need a car in the next year. Do auto loans work the same way?
Audrey
Baltimore, Maryland
Dear Audrey,
When you apply for any kind of loan, the lender may look at your FICO® Scores and credit reports from all three credit bureaus. Let me explain.
In the U.S., there are three national credit bureaus (Equifax, Experian and TransUnion) that house credit histories on most of us. Each of these agencies uses the FICO® Score algorithm to produce a version of the FICO® Score based on the data they collect on each consumer. Lenders request these scores when evaluating consumer credit applications. Lenders determine which credit report and credit score they want to access on you. They can pull from any or all three of the bureaus. So it's smart to know your FICO® Scores from all three bureaus.
Another aspect to consider is that the FICO® Score algorithm is updated periodically to reflect more current lending trends and consumer behaviors. The FICO® Score that is most widely used by lenders is FICO® Score 8. This is the base FICO® Score primarily featured in myFICO products and most widely used by lenders. However, most mortgage lenders are using base FICO® Score versions previous to FICO® Score 8 (FICO Score 5 at Equifax, FICO Score 2 at Experian and FICO Score 4 at TransUnion).
Additionally, some lenders use industry-specific FICO® Score versions. These are scores similar to base FICO® Score versions but tailored for a specific type of credit such as an auto loan or credit card. For example, many auto lenders will use a FICO® Auto Score instead of a base FICO® Score when evaluating that type of credit request. (Learn more about other FICO® Score versions). These scores are also available to lenders at any of the three credit bureaus.
How do you know which credit bureau the lender is using?
Because lenders choose which bureau they pull from, it's important for you to periodically check your credit report and FICO® Scores based on data from all three credit bureaus to ensure the information reported on you is accurate, up to date and that the FICO® Scores based on each credit bureau's data are reflective of your credit risk. This will also help you understand the foundation of your credit.
When you are ready to apply for a loan, consider these general guidelines:
If you are thinking about getting a new car and will need financing, then the FICO® Auto Score is important as this industry-specific version is often used in the majority of auto financing related credit evaluations.
If you are applying for a new credit card, then the FICO Bankcard Score or FICO® Score 8 are important as these versions are being used by many credit card issuers.
If you are thinking of purchasing a home where you will need financing or refinancing an existing mortgage loan, then the FICO® Score versions previous to FICO® Score 8 (FICO Score 5 at Equifax, FICO Score 2 at Experian and FICO Score 4 at TransUnion) are important as these are the versions being used in the overwhelming majority of mortgage related credit evaluations
If you're seeking other types of credit such as a personal loan, student loan, retail credit or other types of credit, then focus on FICO® Score 8.
