Credit scores have become an essential ingredient for making home loans. Whether you are buying, refinancing or paying off bills, chances are your credit scores will play a huge role in the interest rate and overall qualifications for home loans.
Are you a 768? An 820? A 362 (gasp!)? A short time ago, you would have had no way to answer the ever-elusive question (and painfully unpopular pick-up line): "So, what's your credit score?"
Your credit score used to be a top-secret number known only to lending professionals. In March of 2001, the veil of credit-scoring secrecy was lifted. Now with just a click, you can see the three magic digits -- based on a formula developed by Fair, Isaac & Co. (FICO) or a handful of other credit reporting agencies -- that define your credit-worthiness. In FICOland, your number can range from 300 to 850. Anything above 720 is considered average.
Well, it might be a big deal for you. The lending industry uses your credit score for a quick, objective assessment of consumer credit risk. (That's "credit trustworthiness," or "credit karma," in plain Fool-speak.) In some instances, this single measure can determine your fate in important matters -- whether you get a loan for that new home or car and at what interest rate, or if you qualify for the Puppy Palace Angora Visa for 10% off your first Bijon Frisse. For others, it matters not a bit. (For now, at least.)
The higher the score, the better the chance your request will be approved. According to Fair, Isaac, the FICO score is used in 75% of residential mortgage applications.
Information can be referenced at Fool.com