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What's A Credit Score?
Credit Score - a Brief Explanation
When you apply for a mortgage loan, you expect your lender to pull a credit
report and look at whether you’ve made your payments on time. What you
may not expect is that they seem to be more interested in your "credit" score.
"What’s a credit score?" is a common reaction.
Each time your credit report is pulled, it is run through a computer program
with a built-in scorecard. Points are awarded or deducted based on certain
items such as how long you have had credit cards, whether you make your
payments on time, if your credit balances are near maximum, and assorted
other variables. When the credit report prints in your lender’s office, the total
score is displayed. Your score can be anywhere between the high 300’s and
the low 800’s.
Lenders wanted to determine if there was any relationship between these
credit scores and whether borrowers made their payments on time, so they
did a study. The study showed that borrowers with scores above 680 almost
always made their payments on time. Borrowers with scores below 600
seemed fairly certain to develop problems.
As a result, credit scoring became a more important factor in approving
mortgage loans. Credit scores also made it easier to develop artificial
intelligence computer programs that could make a "yes" decision for loans
that should obviously be approved. Nowadays, a computer and not a person
may have actually approved your mortgage.
In short, lower credit scores require a more thorough review than higher
scores. Often, mortgage lenders will not even consider a score below 600.
Some of the things that affect your credit score are:
Delinquencies
Too many accounts opened within the last twelve months
Short credit history
Balances on revolving credit are near the maximum limits
Public records, such as tax liens, judgments, or bankruptcies
No recent credit card balances
Too many recent credit inquiries
Too few revolving accounts
Too many revolving accounts
Credit Score - a Brief Explanation
When you apply for a mortgage loan, you expect your lender to pull a credit
report and look at whether you’ve made your payments on time. What you
may not expect is that they seem to be more interested in your "credit" score.
"What’s a credit score?" is a common reaction.
Each time your credit report is pulled, it is run through a computer program
with a built-in scorecard. Points are awarded or deducted based on certain
items such as how long you have had credit cards, whether you make your
payments on time, if your credit balances are near maximum, and assorted
other variables. When the credit report prints in your lender’s office, the total
score is displayed. Your score can be anywhere between the high 300’s and
the low 800’s.
Lenders wanted to determine if there was any relationship between these
credit scores and whether borrowers made their payments on time, so they
did a study. The study showed that borrowers with scores above 680 almost
always made their payments on time. Borrowers with scores below 600
seemed fairly certain to develop problems.
As a result, credit scoring became a more important factor in approving
mortgage loans. Credit scores also made it easier to develop artificial
intelligence computer programs that could make a "yes" decision for loans
that should obviously be approved. Nowadays, a computer and not a person
may have actually approved your mortgage.
In short, lower credit scores require a more thorough review than higher
scores. Often, mortgage lenders will not even consider a score below 600.
Some of the things that affect your credit score are:
Delinquencies
Too many accounts opened within the last twelve months
Short credit history
Balances on revolving credit are near the maximum limits
Public records, such as tax liens, judgments, or bankruptcies
No recent credit card balances
Too many recent credit inquiries
Too few revolving accounts
Too many revolving accounts