Get the Score Lenders Use to Evaluate Your Home Mortgage Loa
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 FICO®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 interest 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
As you can see in this example using today’s
national rates, a person with a FICO® score of 740 or better will pay $171
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 $2,052 per year. You can see how essential it is to get your FICO 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 FICO® scores from all three credit bureaus when evaluating your loan application. Your score
will likely be different for each credit 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.