What does a low credit score mean?

The importance of a good credit rating really can’t be overstated during the mortgage lending process. While lenders have become more flexible with their loan programs, most still hold the credit rating as one of the key deciding factors in both lending money and determining interest rates. Credit ratings show your overall financial health. When you or a lender receives your FICO score, up to four ‘‘score reasons’’ accompany that score and help explain the top reasons why your score was not higher. According to Fair Isaac & Co., these reasons are more useful than the score itself in helping you determine how you might improve your score over time, and whether your credit report might contain errors. However, if you already have a high score (for example, in the mid-700s or higher) some of the reasons may not be very helpful, as they may reference the factors that have the least impact on your score, such as length of credit history, new credit, and types of credit in use. Here are the top ten most frequently given score reasons. (Note that the specific wording given by your lender may be different from the reasons shown in this list):

1. Serious delinquency
2. Serious delinquency, and public record or collection filed
3. Derogatory public record or collection filed
4. Time since delinquency too recent or unknown
5. Level of delinquency on accounts
6. Number of accounts with delinquency
7. Amount owed on accounts
8. Proportion of balances to credit limits on revolving accounts too high
9. Length of time accounts have been established
10. Too many accounts with balances