The Nature of the Credit Decision and the Role of Credit Scoring

The ultimate decision of whether to lend to any specific applicant, is not a "science" involving strict mathematical formulas. Rather, it is an "art" that relies heavily on various underwriting factors that are assigned differing weights depending on the experience or risk preference of the lender or investor. There are a myriad of factors that come into play in mortgage lending determinations. Some of the more common factors analyzed by underwriters are loan-to-value ratios, debt-to-income ratios, bank reserves, down-payment size, down-payment source, loan type, loan duration, among many others. Credit scoring is just one factor in the analysis. The "art" of underwriting does not lie in assigning numerical values to any of these factors, along with "pass" or "fail" ratings. Underwriting requires that each factor be accounted for and interpreted in light of the other factors and in the context of each applicant and property. In the end, the final decision is based on a judgment call regarding the full set of circumstances that are unique to each borrower and each transaction.

Credit Score Magic

Credit Score Magic

The Shocking True Story of How I Raised My Credit Score 165 Points in 3 Months and Saved $1,000’sIn Interest. First off I’d like to say I am not a lawyer and this is by no means legal advice. Before implementing the ideas in this report consult with a qualified attorney. This is simply my story on the tactics I used to legally and ethically raise my credit score.

Get My Free Ebook


Post a comment