You've probably heard that your credit score is important to getting a mortgage, but maybe you don't really know what your score is and what it means to your mortgage loan application process.

Let's start with the basics. Your credit score is actually called your FICO score. FICO refers to the credit reporting agency Fair Isaac Corporation that lenders turn to when it comes time for credit scoring of home loan mortgage application. Although the exact formula for deriving a credit score isn’t known, we do know that your credit score is based on your total amount of debt, your repayments of debt in the past, and the availability of credit.

FICO scores can range from 300 to 850. The higher your score the better; while 850 represents the “perfect” credit score, no one ever attains the perfect score (well, maybe Bill Gates or Warren Buffett).

When it comes time to take out a mortgage, your FICO score means a lot. First, the decision of whether you will get a mortgage at all rests on your credit score. If your score is lower than 500, chances are you won’t be able to qualify for a home loan. You should work with a mortgage expert or credit counselor to find ways to raise your score. It may take some time, but it’s not impossible.

If you have a credit score that ranges between 500 and 600, you should be able to qualify for a mortgage loan. You will have to make a down payment on the loan, and you might have to pay a slightly higher interest rate, but you can buy a home.

If your score is between 600 and 640, you should have no problems finding a loan with a good interest. You should also be eligible for a variety of minimal down payment mortgage loan programs.

If your score is between 640 and 700, you are in excellent credit shape. Not only can you qualify for a loan, you can qualify for loan programs that don’t require down payments and offer great interest rates.

As you can see, your credit score is one way of determining what level of risk you are to the lender. When you have a higher credit score, you present little credit risk to a lender or financial institution. These lenders are more interested in offering competitive mortgage programs to individuals.

No one wants to be merely a number, but when it comes to the mortgage loan application process, your FICO score is an incredibly important number. You should protect your credit score by carefully evaluating your available credit, your debt ratio and how quickly you repay your debts. It’s an important asset in your financial health.

Steve Essington has been in the mortgage business for over 9 years. He is licensed in Arizona, New Mexico, Oklahoma and California. Steve believes in smart financial planning for today and tomorrow and that integrity always comes first.