Credit, FICO, and secondary markets
How interest rates are really set
FICO scores range 300-850. Above 760 you get the best rates. Below 620 you may not qualify at all. The score is built from your credit reports (Equifax, Experian, TransUnion) using a weighted formula.
Move the sliders to see how each component affects your score and what that score costs over the life of a typical mortgage.
The secondary market: where your loan really lives
When you take out a mortgage, your bank typically doesn't keep the loan. Within months, they sell it to Fannie Mae or Freddie Mac (government-sponsored enterprises that buy "conforming" mortgages, bundle them into mortgage-backed securities, and sell those to investors), Ginnie Mae (which guarantees MBS containing FHA/VA loans), or private label MBS issuers (Wall Street firms buying jumbo or non-conforming loans — this was the 2008 epicenter).
The secondary market is why your loan officer is friendly but you'll never see them again. They sold the loan. Your servicer (the company taking your monthly payment) is often a third-party contractor unrelated to the actual investor.
How interest rates are actually set
Three layers stack: the 10-year Treasury yield reflects long-term safe rates. The mortgage spread (currently ~250 bps, normally ~170 bps) is what investors demand above Treasuries for prepayment and credit risk. Borrower-specific add-ons (typically 0-200 bps) reflect your credit. So when the news says "Fed cuts rates," your mortgage doesn't necessarily drop. The Fed sets short-term rates; your mortgage is priced off long-term Treasuries plus spread plus your add-ons.
What you just learned
Your credit score is not your character. It's a manufactured number generated by a private company using a known formula, optimized for predicting profit-relevant default behavior. The system rewards specific behaviors that are mostly mechanical. The real moves are free, public, and predictable.