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Credit Score Information
FICO® is the most common type of scoring in the mortgage market.
Devised by Fair, Isaac and Co. of San Rafael,
Calif., the score represents a statistical evaluation of a borrower's risk of future
default. The credit score ranges from the low 300s to more than 800. The higher the score, the
lower the probability of default.
The FICO® credit score is produced by running a consumer's credit bureau data through proprietary
statistical modeling software marketed by Fair, Isaac. The score isn't generated by the
lender; instead, the lender requests it as part of the credit report it obtains from one
of the three national credit information companies — Equifax, Trans Union and
Experian (formerly TRW Corp).
Benefits Whether you're currently looking to buy a house or car, or you expect to buy one in the
near future, you'll be happy to learn that over the last several years the path to
securing a loan has become shorter and easier to navigate. That is due in part to the use
of credit scoring in those industries. Credit scores give lenders an accurate and objective
assessment of how likely you are to repay the loan.
How does scoring help me? Credit scoring offers real benefits to consumers:
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Scoring ensures equitable treatment. Scoring evaluates all applicants' credit
information by the same criteria. Opinions do not enter the scoring equation — facts
replace myths and personal prejudices about what constitutes a good future customer.
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Scoring speeds credit decisions. Credit scores help lenders return decisions more
quickly and sometimes with less applicant information, even over the phone or over the
Internet.
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Scoring helps make more credit available. By helping lenders control losses and
costs, scoring helps make more credit available to customers. Historically, the less
information lenders have available to distinguish among credit risks, the more
conservative their lending policy tends to be. This means less credit is available to
everyone — lower risk customers as well as higher-risk — and the cost of that
credit is greater. Credit scoring gives lenders an important piece of information that
allows them to lend to more, not fewer, people.
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