REIPRIME Logo
Intermediate terms

Essential Credit Score Terms

This curated collection includes key terms that might be helpful when exploring credit scores. It focuses on the fundamental numbers for securing loans, how they are calculated, and the factors that influence them. These terms were selected based on common questions and areas where investors often need clarity.

Learning Path

1

VantageScore

VantageScore is a credit scoring model developed by the three major credit bureaus that helps lenders evaluate your creditworthiness, typically ranging from 300 to 850.

Beginner2 min
2

Loan Application

A loan application is a formal document submitted to a financial institution to request borrowed funds, providing detailed personal and financial information for credit assessment.

Beginner5 min
3

Mortgage Pre-approval

Mortgage pre-approval is a formal assessment by a lender of how much money you can borrow for a mortgage, based on your verified financial information, providing a strong advantage when making an offer on a property.

Beginner15-18 min
4

Lender

A lender is an individual or financial institution that provides funds to a borrower for real estate acquisition or development, expecting repayment with interest. They are crucial for leveraging capital in real estate investment.

Intermediate13-14 min
5

Credit Utilization

Credit utilization is the percentage of your available revolving credit that you are currently using, calculated by dividing your total credit card balances by your total credit limits. It's a key factor in your credit score.

Beginner15-18 min
6

Derogatory Mark

A derogatory mark is a negative entry on a credit report that indicates a borrower has failed to meet their financial obligations, signaling higher risk to lenders and impacting loan eligibility and interest rates.

Intermediate5-6 min
7

Underwriting

Underwriting is the process by which lenders assess the risk of lending money for a real estate transaction, evaluating the borrower's creditworthiness and capacity to repay, as well as the property's value and marketability.

Intermediate15-18 min
8

Debt-to-Income Ratio

The Debt-to-Income (DTI) Ratio is a financial metric used by lenders to assess a borrower's ability to manage monthly payments and repay debts, calculated by dividing total monthly debt payments by gross monthly income.

Intermediate18-20 min
9

Credit Inquiry

A credit inquiry is a request by a lender or other authorized party to view your credit report, which can be either a hard inquiry (impacting your score) or a soft inquiry (no impact).

Beginner3 min
10

Debt Service

Debt service is the total amount of principal and interest payments required to repay a loan over a specific period, typically for a mortgage or other property-related financing.

Beginner11-12 min
11

Payment History

Payment history is a record of how consistently and on-time you pay your debts, serving as a key indicator of your financial reliability to lenders, especially for real estate financing.

Beginner12-13 min
12

FICO Score

A FICO Score is a three-digit number that summarizes your credit risk, used by lenders to determine your creditworthiness for loans, including mortgages.

Beginner12-13 min
13

Credit Bureau

A credit bureau is a company that collects and maintains financial information about individuals, compiling it into credit reports used by lenders to assess creditworthiness.

Beginner2-3 min
14

Credit Report

A credit report is a detailed record of an individual's credit history, including borrowing and repayment activities, used by lenders to assess creditworthiness.

Beginner14-15 min
15

Default Risk

Default risk is the potential for a borrower or tenant to fail to meet their contractual financial obligations, such as making mortgage or rent payments, leading to financial losses for lenders and property owners.

Intermediate5 min
16

Down Payment

A down payment is an initial upfront payment made when purchasing a property, representing a portion of the total purchase price and reducing the amount of money borrowed through a mortgage.

Intermediate15-18 min
17

Interest Rate

An interest rate is the percentage charged by a lender for the use of borrowed money, typically expressed as an annual percentage of the principal amount.

Beginner15-18 min
18

Length of Credit History

Length of credit history measures how long you've had credit accounts open and active, serving as a key indicator of your experience and reliability in managing debt for lenders.

Beginner3 min
19

Loan Approval

Loan approval is a lender's official decision to provide financing for a property purchase, based on a comprehensive evaluation of the borrower's financial stability and the property's value.

Beginner4-5 min
20

Loan-to-Value Ratio

The Loan-to-Value (LTV) ratio is a financial metric used by lenders to assess the risk of a mortgage loan, calculated by dividing the loan amount by the property's appraised value, expressed as a percentage.

Intermediate14-15 min