B3-5.1-02, Determining the Credit Score for a Mortgage Loan (10/05/2022)
Introduction
This topic contains requirements for determining the loan-level credit score, including:
Representative Credit Score
The representative credit score for the loan is determined based on the credit scores of each borrower and is used to determine loan eligibility for manually underwritten loans with only one borrower, certain DU loan casefiles, and for pricing purposes (i.e., assessing LLPAs) on all loans. Follow these steps to calculate the representative credit score for a loan:
| Step | Description |
|---|---|
| 1 |
Fannie Mae recommends obtaining at least two credit scores for each borrower. |
| 2 |
Select a single score for each borrower.
|
| 3 |
If there is only one borrower, the single score for the borrower is the representative credit score for the loan. If there are multiple borrowers, determine the applicable credit score for each individual borrower and select the lowest applicable score from the group as the representative credit score for the loan. If there is a borrower who does not have a credit score, determine the representative credit score for the loan based on the credit scores of the other borrowers on the loan. |
Average Median Credit Score
For certain transactions, the average median credit score is used in place of the representative credit score to determine whether the minimum credit score requirement is met.
The following examples demonstrate how to calculate the average median credit score for eligibility purposes.
| Borrowers on the Loan Application | Step 1: Determine each borrower's median score | Step 2: Average the median scores to determine the score for the loan |
|---|---|---|
| Borrower | Scores: 590, 605, 648 |
Average: Not applicable Representative credit score = 605 |
|
Borrower 1 Borrower 2 |
Scores: 590, 605, 648 Median = 605 Scores: 661, 693, 693 Median = 693 |
Average: (605+693)/2 = 649 Representative credit score = 605 |
|
Borrower 1 Borrower 2 |
Scores: 590, 605 Median = 590 Scores: 661, 693, 693 Median = 693 |
Average: (590+693)/2 = 642 Representative credit score = 590 |
Foreign Credit Reports and Credit Scores
With the exception of loan casefiles underwritten through DU, Fannie Mae permits the lender to use a credit report from a foreign country to document a borrower's credit history. (See .) If a credit score is provided with the foreign credit report it cannot be used to establish eligibility, or be delivered to Fannie Mae unless the credit score is the classic FICO, as required by . See Section B3–5.4, Nontraditional Credit History, for requirements that apply when a loan includes a borrower without an acceptable credit score.
Recent Related Announcements
The table below provides references to recently issued Announcements that are related to this topic.
| Announcements | Issue Date |
|---|---|
| Announcement SEL-2022-09 | October 05, 2022 |
| Announcement SEL-2021-08 | September 01, 2021 |
