Credit Scores

Credit scores are critically important for a consumer who is applying for any type of financing into today’s financial climate. Mortgage loans, auto loans, personal loans and credit cards will all review a borrowers credit score and payment history in making a determination whether or not they should lend to the borrower. Credit scores can range between 350 and 850. The average credit score for a consumer in the United States is approximately 670.

A lender will review your credit score and in a number of financing scenarios this will impact the amount of money you qualify to borrow as well as your interest rates. Mortgage lenders will often be required to increase your interest rates or closing fees if your credit scores falls under a certain number. Lenders are essentially passing on to the borrower a portion of the risk based pricing that is forced onto them from agency lenders such as Fannie Mae and Freddie Mac, who all dictate that a lender has to charge additional fees or price bumps based on your credit score and loan to value. . If your credit score is above a 740 then you are able to avoid almost any additional adjustment due to credit score. If you fall below a 680 score, you are likely to have a challenge in applying for most  consumer loans in today’s credit markets. Lenders are increasingly choosing to only lend money to borrowers who have credit scores well above 700 and have no history of bankruptcy or foreclosures. Your credit score is affected by your payment history, any public record items such as bankruptcy or collection accounts, and your available spending limit on your revolving accounts. It is probably a good idea to check your credit score prior to applying for a loan.