What Does a Credit Report Score Mean to You, the Prospective Home-Buyer?

A Credit Article Contributed by John S. Monroe

What's a Credit Report Score?

The Credit Report Score, also known as your FICO score, is a score that is assigned to you by the Fair Issac Company. They use your credit habits and history (from your Credit Report) to figure this out. You can actually get three different FICO scores, because each of the three Credit Bureaus will come up a different Credit Report Score.

They can actually use other metrics to come up with other types of scores, but the Fair Issac FICO score is an industry standard for looking at a consumer's credit worthiness. Your Credit Report Score falls into six ranges: 720-850, 700-719, 675-699, 620-674, 560-619, and 500-559.

How Does the Credit Report Score Affect the Home-Buyer?

The higher your Credit Report score, the better it is for you financially. Higher scores means lower rates when applying for credit. Lower scores means higher rates when applying for credit. What does this mean to the Home-Buyer? Everything in terms of your mortgage. Your score helps the lender decide whether to accept your mortgage application and it also helps the lender determine your mortgage rate!

If you have an excellent rate, you might want to mention that while talking to the seller just in case there ends up being a house bidding war between you and other prospective buyers. The seller might decide to go with you knowing that you will easily qualify for the mortgage. Nothing hurts the seller more than losing a month of having to pay an old mortgage because they went with a buyer who ended up running into problems getting their mortgage loan application approved.

What Difference Does the Credit Report Score Make?

After the significantly big impact of whether or not you will even qualify for a new mortgage, your Credit Report Score will really make a difference in terms of your mortgage rate. Here's an example of how your FICO Score impacts you financially with your mortgage. For illustrative purposes, let's go with a $175,000, 30 year, fixed-rate mortgage:

Your FICO Score Your Interest Rate Your Monthly Payment

720-850 5.70% $1,015.70

700-719 5.83% $1,030.16

675-699 6.37% $1,091.20

620-674 7.52% $1,226.02

560-619 8.53% $1,349.32

500-559 9.29% $1,444.76

Just look at the difference your Credit Report Score can make. Over a thirty year loan period, there is a $154,404 difference that somebody with a low Credit Report Score would have to pay over somebody with the same mortgage who had an excellent Credit Report Score! Interested in crunching some more numbers? Fair Issac's website for consumers, http://www.myfico.com has lots of calculators and tips to help you learn more about how your score could impact your mortgage rate.

Get Your Credit Report Score

You can get your Credit Report Score for about $15 from any of the main Credit Bureaus as well as directly from Fair Issac. Fair Issac also has some neat tools at its website, http://www.myfico.com, that will let you estimate what your Credit Report Score will probably look like based on information that you feed into about your credit and loan history and payment behaviors.

J.S. Monroe