Credit scoring is the system that lenders use in order to determine whether they should lend you money. They use many factors to help them evaluate your risk factor, including: bill payment histories, bank accounts, collection actions, bankruptcies, current loans, credit cards, and any outstanding debts. Scoring models are often complex systems that vary from creditor to creditor, the most popular being the FICO.

• Keep in mind that under the Equal Credit Opportunity Act, creditors cannot factor in things such as race or sex, and in the case of a rejection, must provide you with specific reasons why.

You can get a pretty good idea of your current credit standing by answering these questions: What is your bill-paying history? If you have credit accounts, are they in good standing? Do you have any debts? Consider your credit history: how long is it? Have your payments been timely? Do you own a home, and if so, have your mortgage payments been timely? Consider your job: length of employment, salary, and occupation.

• Remember also that each time you apply for credit it is recorded upon your credit report, and too many inquiries can potentially bring your credit score down.

What if I don't have perfect credit?

All is not lost- but remember that when you have bad credit, every other aspect of your finances must be in good order. This includes full documentation, income, assets, stability, and equity. These subjects often play a larger role in the lender's decision, so they become extremely important in cases where credit is questionable. Also, remember that the kind of credit mishaps or mistakes often show a pattern in themselves. For instance, a series of late payments within a short amount of time is better than sporadic late payments, because it shows a willingness to catch up and pay on time.

Important tip: find your credit grade. Lenders often grade your credit based on certain qualifications, and if you have an estimation, it will let you get a feel for how well you'll do with a mortgage company.

• Learn more about different mortagage programs- click <here>
• For some FAQ's homeowner's or buyer's ask, click <here>