Get the Score Lenders Use to Evaluate Your Home Refinance Loan

After you’ve determined that you’re ready to refinance, 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 760 can often be tens of thousands of dollars over the life of your loan. A low score can cost you money each month or even stop you from refinancing at a rate you know other people are getting.

Basically, the higher your FICO® scores the less you can expect to pay for your loan. For example, on a $216,000 30-year, fixed-rate mortgage:

If your FICO® score is… Your interest rate is… And your monthly payment will be…
National interest rates, updated daily
760 - 850 3.78% $1,004
700 - 759 4% $1,031
680 - 699 4.18% $1,053
660 - 679 4.39% $1,080
640 - 659 4.82% $1,136
620 - 639 5.37% $1,208

As you can see in this example using today’s national rates, a person with a FICO® score of 760 or better will pay $204 less per month for a $216,000 30-year, fixed-rate mortgage than a person with a FICO® score of 620 – that’s a savings of $2,448 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 refinancing. 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 doesn’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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