Would you believe that not too many years ago, credit scoring had little to do with the way banks chose to issue mortgage loans? It’s true. In the past, very few people went into foreclosure. But as foreclosures have grown in number , lenders have begun to study the relationship of FICO scores to the likelihood that you’ll bail on your mortgage. What they found is that there is a definite correlation between a person’s FICO score and the chance they will default on a loan.

How Scoring Works

Your credit score is based on several things: payment history, amount you owe, the kinds of credit you have, and whether you have opened new accounts. (for a more detailed explanation of scores, visit this article.) FICO scores are not the only thing that lenders look at when deciding to give you a mortgage–but they play a very large role.

The Odds of Delinquency

Most people are aware that a credit score below 500 usually means you can’t get a mortgage. That’s because your odds of becoming delinquent on your account are more than 2:1. So the lender would be taking a very large risk by lending you money.

People whose credit score fall in the 600 to 640 range are usually able to get a 100%, or no-money-down home loan. That’s because they are much less likely to be delinquent on an account–30:1. So lenders know that these individuals place a stronger emphasis on paying their debts, and paying them on time.

If a lender looks at a credit score of 700, there is almost no chance that the person will become delinquent on their home loan–.003%. If your FICO score falls in this range, congratulations! You should be able to get an excellent rate, excellent terms, and up to a 125% loan.

For more information about your FICO score, visit http://www.myfico.com