Your credit ‘report card’ and how it affects your home buying future

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Published Date 12/1/2023

Making buying a home a reality depends on several factors — many of them numbers. Home prices, mortgage rates, down payments, and time frames to name a few. But there is a lesser-known figure that can be the deal maker or breaker: your FICO score.

Lenders need to know just how good a bet you are to repay the money you’re asking for, so they pull what is called your FICO score, a three-digit number that represents your creditworthiness. That number, which ranges from 300 to 850, is akin to a financial compass in the housing market. It determines (1) whether you’re approved for a loan (2) your interest rate, and (3) your mortgage terms.

To put it simply, your FICO score is one of the many keys that unlock the doors to homeownership. To make sure you’re getting the best deal, however, you should understand how credit scores work before you apply for a loan. According to Realtor’s Angela Colley, while there are several types of credit scores, most lenders use the credit-scoring model developed by the Fair Isaac Corp. — a three-digit number lenders use to determine how risky it would be to loan you money.

“For example, if your credit score is 420, you’re considered a very high-risk applicant and you may struggle to get approved or find good rates,” says Colley. "If your credit score is 780, you’re considered a low-risk applicant and you’ll likely get the best rates and terms when you apply for a loan.”

FICO is essentially the aggregator, however — not the entity that determines your score. Instead, the information is collected by the three main credit bureaus — Equifax, TransUnion, and Experian. Each credit bureau gathers information about your financial habits and feeds the information into your credit history, which stretches back anywhere from 7 to 10 years.

When you hear the expression “we’ve got your number,” never is it more true than with your credit history. “Everything—from your application for a retail store card to whether you pay your bills on time each month—is reported on your credit history,” says Colley.

The formula used to determine your FICO score proportionately includes your payment history (35%), your debts owed (30%), the length of your credit history (15%), the types of credit you have (10%) and your applications for credit (10%).

Before you even begin looking at houses, it’s a good idea to pull your credit reports and credit scores several months ahead of time — before you apply for a loan. By law, you’re entitled to a free copy of your credit report from each bureau once a year, procured through AnnualCreditReport.com. Or, you can order your credit scores for a small fee directly through the credit bureaus’ websites. But be aware that your FICO score will not be included on your free credit reports.

Realtor, TBWS

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All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

DISCLAIMER: Any interest rates and annual percentage rates (APRs) contained in this publication are based on current market conditions and are for informational purposes only. Unlocked rates and APRs are subject to change without notice and may have pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables—call for details. Progressive Lending Solutions, Inc. Licensed in MN and WI.

Progressive Lending Solutions, Inc

Corporate

NMLS: 107620

Progressive Lending Solutions, Inc.

Corporate: 2277 Hwy 36 W, Suite 304, Roseville MN

Company NMLS: 107620

Office: 866-680-2840

Cell: 612-940-5230

Email: info@progressivels.com

Web: https://www.progressivels.com/