Information on Credit Scoring

How important is my credit score?

When you're thinking about buying a new home, there are few numbers as important to the mortgage process as the three digit credit score. To the lender, your credit score is a prediction of how likely you will pay your mortgage on time, and your credit score will greatly influence the interest rate that is offered to you on the mortgage, or even whether you're able to get a mortgage at all.

How does a creditor decide to grant me credit?

Lenders use a credit scoring system to evaluate your ability to repay a home mortgage loans. Knowing how your credit score works for or against you is important. Having a good or high credit score helps you qualify for more loan programs. Other creditors also use this credit scoring system to help determine if you are a good risk for credit cards and automobile loans.

What is credit scoring?

Simply put, credit scoring is a system creditors use to help figure out if they want to loan you money - or extend credit to you, let you buy something now and pay later. When you fill out a credit application, you provide information about yourself and your credit history or experiences. By providing this information you also agree to a credit check - a process of having your credit report provided to the potential creditor. What this report includes are things like your bill-paying history, the quantity and type of accounts you have, if you've ever been late on making payments, if there were ever any collection actions, if you have any outstanding debt, as well as the age your accounts. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points "a credit score" helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

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Where can I get more information or file a complaint?

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.