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What is a Credit Score and How Does it Affect my Mortgage Loan?

Authored By: MIT FCU

Credit scores are based on information collected by credit bureaus from creditors. Information includes how timely you are with making your payments along as well as how much you still owe compared to your total loan or line.

There are five main factors that go into your credit score:

  1. Payment History (Do you pay on time?)
  2. Amounts Owed (how much of your debt is paid off/do you max out your cards and lines?)
  3. Length of Credit History (How old is your oldest account?)
  4. New Credit (have you been applying for and getting new cards and loans)
  5. Credit Mix (types of credit)

This information is converted into a number to determine how likely you are to pay your loan back monthly. This number, also referred to as “credit worthiness” is compared to millions of other consumers and is used as one of the determining factors regarding the rate you will receive on a loan. Keep in mind, the score is determined by the credit bureaus not the lender. Three of the largest credit bureaus include TransUnionExperian, and Equifax.

Credit scores used for mortgage loan decisions range from approximately 300 to 900. Generally, the higher your credit score, the lower your loan rate will be. Credit scores are broken into categories with 900 being excellent, and often the most challenging to get.

Using credit scores to evaluate your credit history is just one of the factors we use to evaluate your mortgage terms. We tend to look at the overall financial picture and take many factors into consideration.



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