The credit scoring model was designed to quantify the probability of a consumer to pay off the borrowed debt as agreed to the terms of the contract using mathematical equations. It is designed to simply find the likelihood that the borrower will not be 90 days late at any time in the future. It is that simple!
Credit scores range between 350 and 850. In terms of interest rates, the higher the score equates to a lower interest rate. This can literally save tens of thousands of dollars in interest charges over the life of the loan.
Only one out of 1,300 people in the United States have a credit score above 800. These are people with a stellar credit rating and get the best interest rates.
On the other hand, one out of every eight potential home buyers is faced with the possibility that they may not qualify for the home loan they want because they have a score ranging between 500 and 600.
In fact in today’s volatile lending market, it is next to impossible to get a mortgage with a credit score below 620 and that number could go up in the very near future!
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