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