What is Your Credit Score?

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


 

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