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This week's topic will be about credit scores and how they impact your mortgage.

One of the main factors when applying for a mortgage is the credit score, as discussed in the previous episode. In order to grant someone a loan, the lender will make sure the borrower has a good credit score. This will allow them to see if the borrower paid their bills on time and the likelihood they will pay the mortgage on time

But what is a credit score?

The credit score is a 3 digit number that represents, in a nutshell, the creditworthiness of the borrower. It is used to assess the likelihood of a borrower repaying their debts on time. Credit scores are typically calculated based on various factors, including the individual's credit history, payment behavior, outstanding debts, length of credit history, and types of credit utilized

There are more than 25 different scoring models for how to calculate someone's credit score. When applying for a mortgage, the lender will calculate your score by using the FICO score (a score created by Fair Isaac and Company). FICO collects scores from the three main credit bureaus, Equifax, TransUnion, and Experian, and uses the mid score. Therefore, many times when someone will check their credit score on Credit Karma or similar websites, they will be surprised that their score is different when they apply for a mortgage That’s because the mortgage lender calculates the score differently using their FICO score

What is the difference between a hard credit pull and a soft credit pull?

When doing a hard pull on your score, your score can drop slightly, and is used when you apply for a mortgage, credit card, etc. Soft checks, on the other hand, are for pre-approvals or when you check your own credit and they don't affect your credit score

How will your score affect your mortgage?

Your credit score plays a significant role in determining your eligibility for a mortgage and can have a direct impact on the terms and interest rates offered to you. There are three parts to how your credit score can affect your mortgage:

1. Loan Approval - Lenders use credit scores to assess the level of risk associated with lending money

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