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Credit Scores: What a Lender looks at when considering your Loan Application
When purchasing a home, it is important to know your credit score and how that three digit number can influence your opportunities for obtaining a home loan. Your lender looks at your credit score very carefully to decide whether or not they will approve you for the loan and what terms you may qualify for.
In this video, Lis Shupp, a Mortgage Advisor with Samuel Scott Financial Group, breaks down the basic information a borrower needs to know about their credit score. She talks about the factors that impact your credit score, how you can improve your score, and what components a lender will evaluate in order to determine whether or not to give a borrower a loan.
A credit score, also known as a FICO score, is a 3 digit number that rates a borrower’s creditworthiness. A credit score will range between 300 and 900, with a higher credit score typically meaning the borrower has less risk of defaulting on their loan based on their credit. The lower the score, the harder it is to get a home loan because lenders are wary of the higher risk for loan repayment.
There are four main components that a lender will look at when deciding whether or not you are a good candidate for a home loan.
Using a combination of these factors, the lender will then determine your creditworthiness. Even though you may have a high credit score, if you do not have a steady stream of income, you may not qualify for the lenders criteria of being a home loan candidate.
In addition to knowing what a lender looks for, it is important to know what makes up a credit score. If you are aware of these factors then you can identify how well you rank, as well as see which areas need improvement. Although, there is an intricate formula that is used to determine your credit score, it can generally be categorized into five different parts….Read More by clicking HERE!