How Does a Mortgage Lender Use Your Credit Score?
A generation or more ago, mortgage lenders used to have credit officers with a lot more power because the technology wasn't available to crunch the data as it is today. Supporters would say that the human element made the loan process much more personal and subjective — in a positive way. Critics would say that face-to-face meetings, combined with credit histories that lacked today's precision and uniformity, led to the race, income, and gender discrimination laws drafted to remedy in the past.
How much of my credit score is affected by the debt I owe right now?
Actually, only about 30 percent. Your score has to do more with how you allocate that debt. Maxing out credit cards is usually a bad sign. It makes more sense to distribute that debt among a variety of cards with balances well below credit limits — and then pay them off.
Today, you'll have a friendly loan officer greet you where you apply, but so-called “soft skills” really aren't a big part of the picture anymore, at least at major institutions. Lending officers are the human conduit for decisions made largely through computerized processes that start from square one — your three credit reports. Again, it's a very good reason to stay on top of what your reports say.
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Your credit score looks happy when you use credit responsibly, which doesn't mean not using it. What it does mean is low balances paid on time. Loan officers say that the best approach is not to let your balances go beyond 50 percent of your credit limit. If you can shoot for 30 percent, that would be even better.
