Understanding and Improving Your Credit Score
In This Chapter
Understanding the importance of credit scores and credit reports
Looking at what factors determine your FICO score and how to improve it
Boosting your credit score to get better loan terms
You can’t play the home-buying game if you can’t pay. And most people can’t pay without a mortgage.
When you apply for a loan, lenders try to determine your credit risk level. If they decide to loan you money, what are the odds that you’ll pay them back on time? To understand your credit risk, most lenders look at your credit score. Your score influences the credit that’s available to you and the terms of any mortgage that lenders offer you.
Most lenders also use a number of other facts to make credit decisions. They usually look at the amount of debt you can reasonably handle given your income, your employment history, and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you even if your score is low, or decline your request for credit even if your score is high. But your chances for getting approved at the best possible loan terms improve when you have a good score.