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'Credit score' may decide who gets a mortgage It also influences the rates and fees borrowers will pay


WASHINGTON-- The two largest sources of mortgage money in the country have now handed thousands of local lenders a message that could have major impacts on you as a homebuyer or refinancer.

The message goes something like this: We think individual consumers' credit scores are important predictors of their future behavior as mortgage customers. We'd like you to consider such scores when you make loans, or help us obtain them on the loans we buy from you.

Fannie Mae, the Federal National Mortgage Association, recently told its network of lenders that it plans to begin scrutinizing borrower credit scores for mortgages it purchases from January 1996 onward. Freddie Mac, the Federal Home Loan Mortgage Corp., urged its lenders last July to begin using credit scores to evaluate all new loans.

Both companies also told local lenders that they plan to use consumer credit scores to judge the lenders' own quality standards. Send us mortgages that have subpar credit scores, in other words, and we just may send them back to you and get our money back.

Fannie Mae's and Freddie Mac's new policy will accelerate a trend already under way in the mortgage industry: the use of credit scores not only to evaluate loan applications, but to establish the rates and fees individual borrowers are charged, as well as how they're treated as customers once the loan is closed.

Your credit score -- a number usually derived from data maintained electronically by national credit repositories -- is becoming a key factor in whether and on what terms you get a loan. Though banks issuing credit cards have used credit scores for years to evaluate applicants, most mortgage companies only recently began exploring their use. Traditionally, lenders have obtained detailed credit reports on applicants before approving a loan. They often still do, but at Fannie's and Freddie's urging will now get a credit score as well.

Your credit score isn't the same as your credit file. Unlike your file-- a listing of your debts and payment histories with creditors-- your credit score attempts to predict your likely future behavior. Credit scores use statistical analysis techniques to sort through your credit file for telltale patterns. Credit-scoring proponents say even if your regular credit bureau report contains mainly favorable information, your credit score can flag you as a ticking time bomb of future delinquency, and get you rejected. Conversely, say proponents, credit scores can spot good news hidden away in a seemingly bad credit report, and help you get a loan from a bank that normally would reject you.

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