Definition of Credit Score

A Credit Score is a numerical value derived from an analysis of an individual’s credit files, to represent the creditworthiness of an individual.

Lenders, such as mortgage providers, use credit scores to evaluate the potential risk posed by lending money to consumers. Higher scores indicate lower credit risk, making it easier to secure loans and negotiate favorable interest rates.

Related Real Estate Terms

1. Credit Report: A detailed record of an individual’s credit history, including borrowing and repayment behavior, used in calculating the credit score.
2. Lender: An entity, usually a financial institution, that provides loans for the purchase of real estate.
3. Mortgage: A loan taken out to buy property or land, with the property or land typically serving as collateral.
4. Default: Failure to fulfill a loan obligation, such as not making a mortgage payment.
5. Interest Rate: The percentage of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan balance.
6. Loan-to-Value Ratio (LTV): The ratio of a loan to the value of the purchased property.
7. Debt-to-Income Ratio (DTI): A measure of a person’s ability to manage and repay their debts, calculated as their total monthly debt payments divided by their gross monthly income.