Check Credit Report and Credit Score

If you have applied for a loan lately, you have probably heard about your credit score. You certainly heard about it if your loan request was denied – ‘Hey Mr. Jones, do you really expect me to finance a Humvee for someone with a credit score of 490?’ You probably heard about it if your score was spectacular – ‘Wow, 830! Are you sure you wouldn’t like to buy two houses?’ However, if you fell somewhere in the middle, you might not realize the impact that this technology-based underwriting wrinkle may have had on the quality of your loan.

Credit scoring is not new, it has been showing up in some form on credit reports for a number of years, but it has been raised to an art form by a company called FairIsaac Corporation or FICO. FICO developed the software as well as many ancillary products, aimed at both lenders and consumers, that compute credit scores and offer advice on interpreting or improving them.

Credit scores are only part of the information that lenders look at when making a lending decision and a low score is not necessarily a fatal blow. Each lender has its own strategy and level of risk and each has its own cut-off point below which it will not extend credit at any price. But knowing the hows and whys of credit scoring is essential to anyone thinking about a purchase money mortgage, a refinance, or a home equity loan in the near future.

There are other companies other than FICO which score and report on credit, but FICO’s is the most popular method (although each of the credit bureaus have their own proprietary name for the FICO product) and most lenders refer to it as a FICO score. Therefore, we will use that term. Most of the information on credit scoring that follows was provided by them or by The Bureau of Consumer Protection, Federal Trade Commission.

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