Why Lenders Care About Credit Scores

Many borrowers ask me why a silly three digit number, the credit score, is so important. Well, for one, it gives lenders a snapshot of financial behavior. The way the scores are calculated provide a really good instant photograph of the borrower’s potential to repay the loan in a timely manner. After all, lenders are in business to make money and they need a method to gauge the risk of exposure. The score is dynamic and can change dramatically based on a borrowers debt management.

With that in mind, below is a numerical analysis of how lenders view the risk of default for different credit score ranges. The risk is of course reflected in the interest rate offered to the borrower. 

Credit scoring and loan default ratio

As you can see, a credit score it not just any silly three digit number! Visit my website to learn how I can help you face your credit fears!

This site is for informational purposes only. It is not sponsored or in any way affiliated with the government. If you are in need of a mortgage loan, consult with a licensed mortgage professional. All fair housing and equal housing opportunity laws apply when applying for a mortgage or buying a home. Copyright 2012.