REBUILDING YOUR CREDIT
Even if your home isn’t being foreclosed, improving your credit score is essential to getting the best home loan. Your access to a favorable interest rate — in fact, your ability to get a loan at all — depends largely on several factors. One is your income level and the stability of your earning power. A lender will want to know that you earn enough money to make your installment payments on time, and that you have an established record of earning money through a steady work history. You have little control over your work history, but your credit score is something you can take steps to improve. There are numerous organizations that calculate your credit scores. For example, VantageScore® and the three national consumer credit bureaus — Equifax, Experian, and TransUnion — all have proprietary models. However, it’s estimated that more than 90% of lenders who make mortgage loans use the FICO® scoring. (The name “FICO” is derived from Fair Isaac Corporation, which originated this particular entity.) FICO actually has several models for scoring related to credit products, including a special model for the mortgage industry. For this reason, if you check your FICO score through your bank or credit card company, it won’t necessarily be the same score your lender sees when you apply for a home mortgage. Base FICO scores range from 300 to 850. Here’s how the ranges break down:
• Exceptional: 800+ • Very good: 740–799 • Good: 670–739 • Fair: 580–669 • Poor: 579 and below
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