Credit score now carries more weight in mortgage

When lenders issued mortgages to anyone who asked, borrowers could largely ignore their credit scores, the most important and most incomprehensible determinant of a loan's interest rate.

But now that banks have tightened their lending standards considerably, borrowers must sometimes search for ways to eke out a point or two more on their credit scores to qualify for loans or for more favorable rates. The reports come from Experian, Equifax and TransUnion, credit bureaus that evaluate the financial-management abilities of millions of Americans.

Credit-card companies, utilities and other creditors send reports to the bureaus, which rely on software from the Fair Isaac Corp. (creator of the FICO score), along with their own, to grade a borrower on an ascending scale of 300 to 850.

Loan officers review the scores from all three credit bureaus and base their loan offers on the middle number.

If a couple - married or not - is jointly applying for a mortgage, the loan officer will choose the middle score of the partner with the lower score.

That score essentially dictates the loan terms that a lender offers.

Brokers buy reports from services that supply data from the three credit bureaus, and each report gives details about items that adversely affect a score.

If a consumer wishes to challenge such items, credit bureaus will do so on the consumer's behalf, or consumers can also call or write creditors directly.