Get the scores that lenders use to evaluate you

After you’ve determined that using your equity is the way to go, you need to understand how lenders see you. Lenders will determine your credit-worthiness based on your three FICO® scores.

By getting your scores, you can be sure that you know the kind of loan offers you should be receiving before lenders present you with numbers.

FICO® scores are the credit scores most lenders use to determine your credit risk. You have three FICO® scores, one for each of the three credit bureaus – Experian, TransUnion and Equifax. Each score is based on information the credit bureau keeps on file about you. As this information changes, your FICO® scores tend to change as well.

If you don’t think that your FICO® scores are important, think again. The rate you can expect to pay for a loan is dependent on these scores. The difference between a FICO® score of 620 and 740 can often be thousands of dollars over the life of your loan. A low score can cost you additional money each month.

Interest rates and payments for a 15-year, $50,000 home equity loan:
If your FICO® score is… Your interest rate is… And your monthly payment will be…
National interest rates, updated daily
740 - 850 4.56% $384
720 - 739 4.93% $394
700 - 719 6.18% $427
670 - 699 7.56% $465
640 - 669 9.06% $509
620 - 639 10.56% $554

As you can see in this example using today’s national rates, a person with a FICO® score of 740 or better will pay $170 less per month for a $50,000 15-year home equity loan than a person with a FICO® score of 620 – that’s a savings of $2,040 per year. You can see how essential it is to get your scores in the higher ranges if they are low, and also how important it is to keep them high if they are good.

Even if you think your FICO® scores are fine, there may be errors on your credit report that you’ll want to clear up before applying for a loan. Addressing errors before you begin the process may be annoying, but dealing with them while you’re in the middle of trying to secure a loan will be downright infuriating.

Most lenders use all three FICO® scores when evaluating your loan application. Your score will likely be different for each bureau and there may be errors on one that don’t appear on the others. When you apply for a loan, do it with the peace of mind of knowing how you’ll be viewed by lenders.

Let Suze Orman help you take control of your FICO® score and save money on your mortgage payments. In addition to providing you with 3 FICO® scores and 3 credit reports, Suze Orman’s FICO® Kit Platinum shows you how to get the lowest rates on credit cards, get out of debt quicker, and save on mortgage and car loans. – get Suze Orman’s FICO® Kit Platinum now.

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myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.

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