When reviewing a loan application an underwriter will look at the credit scores generated from the 3 different CRA's or Credit Reporting Agencies (Experian, Equifax, Transunion).  Each score is based on information the credit bureau keeps on file about you. As this information changes, your credit scores change as well. Credit bureau scores are also called 'FICO scores' because most credit bureau scores used in the U.S. are produced from software developed by Fair Isaac and Company. 

Typically the scores from each CRA will vary slightly, so the underwriter will use the middle score for the purposes of your loan application.  The biggest impact your credit score has is on your interest rate.   As you can see in the example below, a person with a score of 720 or better will pay $601 less per month for a $250,000 30-year, fixed-rate mortgage than a person with a scores below 560 —THAT'S A SAVINGS OF NEARLY $7,213 A YEAR! You can see that it pays—literally—to improve your credit scores.

For a $250,000 30-year, fixed rate mortgage:
If your credit score is:	Your interest rate is:	Monthly payment	Savings over 30 years
720+	5.9%	$1,482.84	$216,389
700 - 719	6.3%	$1,547.43	$193,137
675 - 699	6.6%	$1,596.65	$175,417
620 - 674	7.6%	$1,765.19	$114,743
560 - 619	8.5%	$1,922.28	$62,020
500 - 559	9.4%	$2,083.92	ZERO

In addition to a better interest rate, having a higher credit score can help you qualify for a more expensive home, and even limit the level of documentation you would need to provide to the lender.  Below is a general rule of thumb lenders use when determining requirements for their loan programs.

• Clients with a credit score of 720 or better are considered 'A+ paper'. They qualify for lower interest rates, limited documentation loans and most often get to the closing table quicker.
• Clients with scores below 620 are typically classified as 'sub prime' and while they are still eligible for a loan, it may not be as attractive or as timely.