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Credit scores play a major role in determining a borrower’s eligibility and interest rate for a loan or mortgage. A credit score is a numerical rating that reflects a person’s creditworthiness based on their credit history. The higher the credit score, the more likely a borrower is to be approved for a loan or mortgage, and at a lower interest rate.
When a borrower applies for a loan or mortgage, the lender will typically check the borrower’s credit score and credit report to determine their creditworthiness. The lender will use the credit score as one of the primary factors in deciding whether to approve the loan or mortgage, and at what interest rate.
A good credit score can make it easier to qualify for a loan or mortgage, and can result in a lower interest rate. A higher credit score indicates to the lender that the borrower is less risky, and less likely to default on the loan.
The most commonly used credit score in the United States is the FICO score, which ranges from 300 to 850. The range for a good credit score is generally considered to be between 670 and 739, while a score of 740 or above is considered to be excellent.
It’s important to note that credit scores are not the only factor that lenders consider when determining eligibility for a loan or mortgage. They may also consider factors such as income, employment history, and debt-to-income ratio. However, a good credit score will definitely play a significant role in the lending decision and rate offered.