| The three major sources of credit information | | | | years for credit cards and other types of |
| about consumers are Equifax, Trans Union, and | | | | consumer loans, such as automobile and home |
| Experian. Lenders will obtain your credit | | | | equity loans. Now, credit scoring is being |
| record from all three of these credit | | | | used in mortgage lending. |
| bureaus. The lender will evaluate this | | | | |
| information to determine whether or not you | | | | Why is credit scores used? Lenders want to |
| are likely to repay the mortgage loan in a | | | | extend credit to people who will pay them |
| timely fashion. | | | | back, and pay them back on time. They also |
| | | | want to be objective in making lending |
| How does the mortgage lender evaluate the | | | | decisions. In order to approve your |
| information in thecredit report? One way is | | | | application for a mortgage loan, your lender |
| through credit scoring. | | | | must evaluate and understand many different |
| | | | risk factors, including your ability to repay |
| What is a credit score? A credit bureau | | | | the debt as well as how you have managed |
| score, is one of many pieces of information | | | | credit in the past. Because borrowers' credit |
| that the lender will use when evaluating a | | | | histories can range from being very simple to |
| mortgage loan application. A credit score is | | | | being very complex, it is sometimes difficult |
| a summary of a borrower's credit report and a | | | | to determine whether a given credit history |
| numerical measurement that reflects a | | | | is acceptable or unacceptable, or whether |
| borrower's management of credit. Your credit | | | | certain information represents a strength or |
| score is based on the records compiled by | | | | a weakness. |
| credit bureaus and includes the information | | | | |
| reported each month by your creditors, such | | | | By using credit scoring, a lender can quickly |
| as the amount of existing credit you have and | | | | and objectively evaluate your credit history |
| your payment history. A credit score | | | | in a consistent manner, and determine the |
| considers all of the information in the | | | | likeli¬hood that you will repay the loan |
| credit report and converts this information | | | | as agreed. The use of credit scores not only |
| into a number that helps the lender determine | | | | improves the accuracy of the analysis of your |
| the likelihood that you will repay your loan | | | | credit history, but does so in a way that |
| on time. 00 is the lowest possible score, 900 | | | | enhances the efficiency and consistency of |
| is the highest. 680 to 700 is considered | | | | the underwriting process. |
| excellent, and less than 620 is typically | | | | |
| considered sub-rime, though if there are | | | | How does a lender get my credit score? When |
| errors on the report, this would be | | | | you apply for your mortgage loan, you will |
| considered. | | | | give your lender permission to check your |
| | | | credit history with the various credit |
| Credit scoring is an objective process, based | | | | bureaus. More than likely, the lender will |
| only on the infor¬mation in your credit | | | | obtain your files from the major credit |
| report. Factors such as age, race, religion, | | | | bureaus: Equifax, Trans Union, and Experian. |
| gender, national origin, marital status, your | | | | In addi¬tion to obtaining a credit report, |
| income, employment, and where you live are | | | | the lender will also request a credit score. |
| not considered in determining your credit | | | | Your score is calculated by the credit bureau |
| score. | | | | -- not your lender -- and is based only on |
| | | | the information contained in each of the |
| Is credit scoring new? Banks and other | | | | credit bureau's files. |
| lenders have used credit scoring for over 30 | | | | |