Understanding Credit Scoring on Mortgage Refinancing or Second Mortgage Loans

For years, creditors have used "credit scoring" to determine whether an individual is a good credit risk. Credit Scoring has recently become a hot topic, due in large part on the willingness of mortgage credit industry, to use the process to assess their likelihood of repayment of home mortgage refinancing or second mortgage loans. Even the insurance companies use credit scoring as part of their subscription process when writing about cars and home insurance. Credit scoring is a system based on a statistics program, which awards points for certain factors that help predict who is most likely to repay a debt like a mortgage refinance or second mortgage loan. The total number of points, or score, is what lenders use to determine creditworthiness of an individual. A large random sample of customers is taken, and analyzed statistically to identify characteristics relating to credit risk. These factors are then given a weight based on how strong a predictor of who would have a good credit risk. Credit Scoring models vary from lender to lender, but more generally include the following factors: 1) Your current amount of debt as compared to your potential total amount of credit available. 2) History of payment on current accounts and earlier. 3) The length of your credit history. 4) The number of requests for credit (each time a lender pulls credit in response to your question). 5) The number of separate accounts opened. 6) Collection actions including judgments, apparent, foreclosures and bankruptcies using the statistics program, lenders compare the information on you credit for the performance of other users with similar profiles. Therefore, it is usually more reliable than a subjective decision or opinion, because it is based on real data and statistics. Although it may seem a little 'impersonal, if used properly, credit scoring may enable creditors to evaluate credit applications faster and more accurately than individuals, impartially and objectively. In addition, the refinancing home loans and the process of second mortgage loan has been shortened because of the speed with which secured creditors can now make decisions using the valuation model of credit. Click here for more information on mortgage refinancing and Second Mortgage Solutions. Peckenpaugh Bob is a planner of professional guides with over 15 years of lending and banking experience. Its programs assist clients with cash flow increasing, the reduction in liabilities and net worth of the building incorporating a client's mutual decision with their complex financial plan. He is a manager with CFIC Home Mortgage providing both the buying and refinancing. Bob has a degree in Marketing and Management and is certified Fair Credit Reporting Act. Click here for more information on mortgage refinancing and Second Mortgage Solutions.