Fico Score - Gateway To Mortgage Approval And Better Rates

Author:  Rob K. Blake        Published: August 13, 2008

The Fico score used by Experian along with the other two credit scores created by other bureaus, is a more powerful influence in mortgage approval than ever before. Fico scores are now not only used to approve the loan but better scores get better rates.

FICO Score Only One of Three

Three bureaus have created 3 different credit scores lenders used to assess borrower risk. Experian’s version is called a FICO score after the creator, Fair Isaac Corporation. TransUnion’s score is called the Empirica score. Equifax’s credit score is called the Beacon score.

In mortgage approval all the three scores are used to determine credit worthiness. In other lending scenarios like auto loans only one is used…and the preferred score in auto lending is the Fico score.

When it comes to pricing a mortgage and getting the best rate possible, credit scores are now being used to adjust pricing to match the risk outlined by the credit score.

For example, for borrowers with a 5% down payment, using a 2 loan scenario to close (an 80% first mortgage and 15% second) would have to pay an additional 1.5% discount point cost, if their credit score was below 680….that’s a serious hit. That equates to $1500 per $100,000 of loan amount.

In declining markets like Miami, Phoenix, Las Vegas and others even minimum credit scores have been set.
For example, you’ll be automatically denied if your credit score and loan-to-value (LTV) don’t meet the chart below:

Minimum 680 fico for LTV > 90%
Minimum 620 fico for LTV > 80%
Minimum 600 fico for LTV < 80%

Fico scores and the other credit scores are now more important than ever to getting your loan approved, but also just as important in determining your best mortgage rate.

Good Luck!

Author: Rob K. Blake