about credit scores...

The most commonly used credit score today is known as a "FICO" score. A company named Fair, Isaac & Co. developed a mathematical way to look at factors in your credit record that may affect your ability and willingness to repay a debt.

These factors can include your record of repaying loans, i.e., student loans, car loans and credit card bills; any public records you might have, like tax liens and bankruptcies; how often you apply for installment loans and new credit cards; and how much you actually owe. For example, if you charge up to the limit on your credit cards – even if combined they don't seem to add up to a lot of money – this might hurt your credit score. Or, if you have recently applied for several credit cards, including department store payment plans or credit cards – even if you haven't begun to use them yet – your credit score might be affected negatively.

Credit scores are widely used today because they speed up the mortgage approval process for most consumers, allowing mortgage lenders to work with consumers whose credit scores raise questions about their credit records. What's more, by using credit scores, mortgage lenders treat each person objectively because the same standards apply to everyone.

Credit scores assess each factor equally for every consumer, every time. They do not include race, religion, national origin, gender or marital status as factors. Credit scores are blind to demographic or cultural differences among people.

Mortgage lenders look at other information besides your credit score before deciding whether to make you a mortgage loan. They look at your employment history, your income and outstanding debt, savings patterns and amount of savings, and the type of mortgage you want.

Mortgage lenders also look at the value of the property you want to buy or refinance and the amount of the down payment you plan to make or the equity that you have. All of these factors combined together make up your "borrower profile." Mortgage lenders view this full picture to make a final decision about your ability and willingness to repay a mortgage loan.