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Credit score and its importance

The very first thing that your loan officer checks when you apply for a mortgage or any kind of credit is your credit score. You are rated in terms of the score which in most cases influences the amount you borrow. Understanding the credit score in a better way enhances your chances to develop a higher score and thus benefit from loans at better terms and conditions. A credit score is that numerical quantity which makes all the difference in getting your loan approved by a mortgage lender or a car loan provider or even getting turned down for any kind of credit. Creditors use this score in finding out the risk in offering you the loan and your ability in paying it off. The better your score, the lesser is the risk involved. How the scores influence interest rates Generally, credit scores range from 300 to 900 and an average score of 650 is rated as suitable for getting mortgages at reasonable rates and terms. It's your score that affects the interest rates on your home loan, insurance premiums and even the chances of getting a suitable employment. The following table demonstrates how your score affects the interest rates and hence monthly payments required to pay off a 30 year fixed rate mortgage worth $210,000. Credit Score Interest Rate Monthly Payment 760 - 850 6.3% $1,330 700 - 759 6.5% $1,360 680 - 699 6.7% $1,390 660 - 679 6.9% $1,420 640 - 659 7.3% $1,500 620 - 639 7.89% $1,600 Let us consider Mr. X having a score of 729 and qualifying for the 30 year fixed rate loan of $210,000 at 6.5%. He pays a monthly installment of $1,360. Another borrower, Mr. Y having a score of 685 gets the same loan amount from the same lender. But Mr. Y makes a higher monthly payment of $1,390 at a comparatively higher rate of 6.7%. The variation in the rates and payments is due to the difference in the scores of Mr. X and Mr. Y. Types of Credit Score Such scores are of various types of which the FICO Score is the most popular one. It is calculated on the basis of the scoring model developed by the Fair Isaac and Company or FICO. The score is determined by evaluating the information available in the report. The FICO score is provided by all the three major reporting agencies - Experian: It is one of the 3 major credit reporting agencies that provide consumer credit information to businesses so that they can lend money to consumers. Equifax: It is a major credit reporting agency in United States that gathers information from various sources and then compiles them in a report. Trans Union: This is another major credit reporting agency in the United States. It provides personal credit information directly to consumers along with making credit reports available to potential creditors. Apart from the FICO Score, there are alternative scores developed especially for consumers with poor credit. In general, all these scores are affected by factors such as your bill paying history, outstanding loan balance, the type of credit accounts maintained and others depending upon the type of the score. Introducing a Unified Score The FICO Scores offered by the credit reporting agencies vary from one another. This variation in the scores makes a difference in the interest rates charged on a certain loan amount. So all the agencies have developed a single scoring model based on which you can avail the same score from each of them. Thus, lenders can rate you in a consistent manner. Such a score is known as the Vantage Score and it will be introduced to consumers later this year although it is already made available to all businesses. Related Readings Credit Report - Determines your creditworthiness How do lenders rate you on credit score and other factors? Does a good score guarantee low interest rate? How can you improve your Score? Related Forum Discussion What factors affect your credit score calculation? Can I improve my score quickly? Can I get mortgage at bad credit? Are Credit Report and Score the same? At FICO Score of 630, can I get mortgage or improve score?

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Martin.J Guest 0.10 Dollars($)	Posted: Sat Sep 03, 2005 2:06 am    Post subject: are scores treated the same for all mortgages and loans?
Caron Moderator Joined: 19 Jul 2005 Posts: 1403 Location: florida 235.65 Dollars($)	Posted: Sat Sep 03, 2005 2:52 am    Post subject: RE: Hi Martin.J Welcome to the forums. There are various loan programs that require different scores to qualify for a given rate and term. A mortgage loan requires a higher fico score than a credit card for the same rate. This is because it includes higher loan amounts and repayment periods. The score required to qualify for a loan also depends on the nature of the loan. For example, a borrower having low credit point and applying for a 15 year fixed rate mortgage with 25% down payment may get better rate than an individual applying for a 1 year adjustable rate mortgage. Lenders also consider all risks involved while they ask for a certain range of score to qualify for a particular rate. Those having greater number of risky clients may require you to have high points to qualify for a prime interest rate than lenders with less number of risky clients. Therefore, it is quite possible that for a particular credit score, you can get a prime rate with one lender, but a less suitable rate with another. Hope you have benefited from this information. Please feel free to post further queries. Regards, Caron.
jameshogg Joined: 20 Dec 2005 Posts: 987 Location: nevada 122.97 Dollars($)	Posted: Fri Jan 20, 2006 4:36 pm    Post subject: Hi, Hope I can add some more information. The resulting score that comes out after analyzing the credit report is compared with that of other consumers with similar profiles and the lenders can thus predict, using this score, about a person's ability to repay. The most common method to determine score is FICO developed by Fair Isaac and Company along with three other major credit bureaus - Experian, Equifax and TransUnion. Today everyone can access their credit score at a number of websites including the websites of the three major bureaus and Fair Issac. Your lender can be asked by you for an access to your score too, while you apply for a loan. James
Richi Guest 0.10 Dollars($)	Posted: Thu Feb 02, 2006 4:46 am    Post subject: How to improve credit score? How can I improve my score?
jerry Moderator Joined: 17 Oct 2005 Posts: 551 Location: MICHIGAN 51.74 Dollars($)	Posted: Wed Feb 08, 2006 10:07 pm    Post subject: Hi, Please go through the section on credit repair. I hope it will help you with the required information. Thanks, Jerry
johnb Guest 0.10 Dollars($)	Posted: Sat Feb 25, 2006 9:34 pm    Post subject: bankrupcy my bankrupcy is almost 9 years. when will it remove from my record? will my credit increase when it is removed?
adonis Joined: 22 Oct 2005 Posts: 1346 Location: ALASKA 122.17 Dollars($)	Posted: Sat Feb 25, 2006 10:59 pm    Post subject: Re Generally it will take 10yrs to me removed from your report. Once the 10yr is over, it will be automatically removed from your report. Basically it wont lay any impact on your report, though it will be good for you. _________________ Procrastination is the enemy of your financial sucess
ldbeez Guest 0.10 Dollars($)	Posted: Tue Jun 13, 2006 1:44 pm    Post subject: credit score what is the average score in america, because mine is 672 at the moment?
jameshogg Joined: 20 Dec 2005 Posts: 987 Location: nevada 122.97 Dollars($)	Posted: Tue Jun 13, 2006 1:51 pm    Post subject: Anything above 650 is considered as a good score to grant a mortgage loan. So yours can be considered good although you must be aware that the higher your score the lower will be your rate.
Samantha Community Mentor Joined: 16 Sep 2005 Posts: 1486 Location: MASSACHUSETTS 127.85 Dollars($)	Posted: Tue Jun 13, 2006 1:58 pm    Post subject: credit score Hi ldbeez, Welcome to MortgageFit Forums. Each lender maintains their own criteria depending on the loan type in order to approve a borrower. In general 650 and above is a good score to qualify. Considering all other things meeting the requirement a borrower with points of 650 or higher will have a good chance to obtain quality loans at the best interest rates. Feel free to ask if you have any more queries. God bless you. For MortgageFit, Samantha _________________ Know how to compare lenders with mortgage booklet
Umadevi Bhoga Guest 0.10 Dollars($)	Posted: Fri Jun 30, 2006 10:30 pm    Post subject: Applying to obtain credit score How to apply an agency to get my report. Please help me. Thank you Uma
adonis Joined: 22 Oct 2005 Posts: 1346 Location: ALASKA 122.17 Dollars($)	Posted: Fri Jun 30, 2006 10:56 pm    Post subject: RE Hi, Umadevi Welcome to the forums. you can apply for the credit report to any of the 3 credit agencies. They will give you the complete report with detail information. You can try http://www.experian.com/ Adonis _________________ Procrastination is the enemy of your financial sucess
kwaker Guest 0.10 Dollars($)	Posted: Tue Apr 03, 2007 12:49 pm    Post subject: medical and/or disupted items How much do medical accounts and/or other disputed items affect your score and mortgage loan potential? I read somewhere-forget where-that medical or disputed items do not factor in when deciding a mortgage. Is this true? My roomie and I are in the process of fixing errors on his CR as well as getting other things paid off and in good standing etc., and as we qualify ( I am disabled and we meet the income criteria) for WA state bond program help with down payment and closing costs, does that also affect the process in regards to risk?
o coplien Guest 0.10 Dollars($)	Posted: Tue Apr 03, 2007 2:30 pm    Post subject: Quote: How much do medical accounts and/or other disputed items affect your score and mortgage loan potential? Outstanding medical bills can affect your credit score but disputing any account information does not affect your score.

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