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Guide to understanding credit guide

A No-Nonsense Guide to Understanding Cred it S cores CIntroduction Credit and credit scores are more important than ever before More restrictive credit and underwriting standards have kept thousands of military members from purchasing or re ?nancing a home in the past two years VA-approved lenders nationwide have ratcheted up their requirements in the wake of the subprime meltdown Quali ?ed borrowers can still purchase a home with no money down but veterans and active duty service members without a solid credit score are ?nding it tough to secure ?nancing Lenders might start to loosen up a bit in the coming years but in most cases a more conservative approach to home lending will continue to de ?ne the industry and govern the path to homeownership For America ? s service members the reality is both stark and simple Building a solid credit pro ?le is more crucial than ever before This guide aims to help borrowers do exactly that Credit Scores and Homeownership There was a time when obtaining a home loan involved little more than a handshake with your local banker After all he was probably your aunt ? s neighbor and served on the PTA with your brother-in-law He knew if you were a good credit risk just like you knew that he mowed his lawn every Saturday Those days are long gone Today lenders scrutinize a prospective borrower ? s credit score and overall ?nancial pro ?le Your three-digit credit score helps determine your interest rate your monthly mortgage payment and whether you can qualify for a home loan in the ?rst place Credit requirements and standards are getting tighter by the day VA lenders avoided the kind of risky lending that helped trigger the nation ? s economic collapse But all borrowers are paying the price C What is a credit score A credit score is essentially a measurement of a borrower ? s willingness and ability to repay debt Borrowers build up their credit pro ?le by selectively using credit and repaying it on time each month along with other key factors we ? ll discuss shortly But when people talk about their ??credit score ? they ? re most likely talking about one scoring model in particular the FICO score This mathematical algorithm comes from the Fair Issac Corporation or FICO a Californiabased company that also created the ?rst-ever credit score FICO scores run from to They are calculated using a complex web of factors some in all broken down into ?ve broad categories For consumers that ? s a lot of credit scores to worry about Scoring ranges for the di ?erent methodologies vary The companies that extend credit to borrowers report their monthly transactions to one or more of the nation ? s three credit reporting agencies Equifax ? Experian ? TransUnion Each of the three credit agencies has its own scoring method and there ? s a fourth ?? the VantageScore ?? that the trio created together CWhat is a