Home Loan Workbook

UNDERSTANDING YOUR CREDIT SCORE One of the first steps in readying yourself to buy a home is to examine and evaluate your credit standing. Even though your credit score isn’t the only factor lenders use to determine whether or not you qualify for a loan, it’s an important part of your overall credit health. FICO is the most widely used scoring model in the United States and Canada. FICO’s model is designed to determine how likely you are to become 90 days late on any payment within the next 24 months. Each financial choice you make—how much you spend on credit, how responsibly you pay down your debts, how many credit-related accounts you have, etc.—gets reported to three reporting agencies: Equifax, Experian, and TransUnion. When a lender gets your credit report, they also usually request the accompanying credit score, which boils everything down into a single score based on that agency’s proprietary version of the FICO scoring model. Your score can be broken down into 5 basic components: payment history, amounts owed, length of credit history, new credit inquiries, and type of credit used.


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