Let's say that you're a borrower and you may have had a charge-off in your credit file. Once all the data are gathered, the system spits out a number roughly between 300 and 800. Anything higher than 660 calls for a sigh of relief. Below 620, however, landing a loan becomes a long shot. Mortgage lenders typically take a score and consider it in light of, among other things, a home's price, the applicant's income and the percentage of the paycheck a monthly house payment would swallow.
Lenders are only one of the mortgage industry groups that scrutinize credit scores.
Private mortgage insurance companies use the score to assess their risk before dealing with a customer who does not have enough money for a full 20 percent down payment. On the lender side, the agencies Freddie Mac and Fannie Mae buy mortgages from lenders, bundle them as securities and sell them to investment firms. Those firms depend on either staff analysts or outside rating agencies that use credit scores to assess the securities' risk. From community banks, wholesale lenders and large mortgage bankers, all the way up to ratings agencies and investors, it provides a common benchmark. Other industries use credit scores as well, and customize them with their own variables.