Yes,
one number can absolutely change your life. Your credit score, which is the
standard measure of credit risk, is critical when you apply for a home mortgage
and is the determining factor in whether a lender makes a "yea or nay" decision.
The "good ol' boy days" are gone, and the fact that you might know your lender
is likely of no importance. He or she will seek out your credit score to
determine whether you'll likely meet your future obligations and may, or may
not, buy a home.
There
are three major credit-reporting agencies – Equifax, TransUnion, and Experian -
and each provides critical information to lenders, thereby reducing fraud and
credit losses. Furthermore, each takes a different approach to calculating your
credit score. Equifax's model is called BEACON, TransUnions's is called EMPIRICA,
and Emperian's is called FICO, the best known, developed by Fair Isaac
Corporation.
Your credit file contains personal data, such as birth date, aliases, current
and previous addresses, judgments, tax liens, notices of default, bankruptcies,
and information on most of the payments you've ever made on homes, cars and/or
credit cards. However, the most important information the agencies use is the
following:
*
Credit history – How long have you had credit?
*
Payment history – Do you pay bills on time?
*
Credit inquiries – How many times have companies checked your credit?
*
Credit card balances – How many credit cards do you have and how much do you owe on each?
All information is factored in and assigned a value. An FICO is then determined
with a range from 300 to 800. The higher your credit score, the better. In
addition to getting a loan, a higher score may qualify you for a lower interest
rate.
Before applying for loans, prospective homebuyers are encouraged to check their
credit scores with the three agencies and dispute and correct inaccurate data.
Find out your own score before a lender surprises you with a low number.
Equifax's Web site is
www.equifax.com, TransUnion's is www.transunion.com, and
Experian's is
www.experian.com. Furthermore, Fair Isaac Corporation's Web site is
www.myFICO.com. A minimal fee is charged to obtain your FICO score and
credit report.
Knowledge is empowering, and the more you know about your own credit score, the
more informed you will be when you meet with a lender to obtain your loan and
the best interest rate possible for your new home.
Your Credit Score is very important.
