Credit scoring places you in one of
three general categories.
If you
have a FICO score of 680 or above, you may be considered an
A+ borrower. Your loan will involve basic underwriting, probably
through a computerized automated underwriting system and could be
completed within minutes. If you are in this category, you have a
good chance of obtaining a low interest rate and closing your loan
quickly.
If you have a FICO score below 680 but above 620, an
underwriter will probably take a closer look at your file to
determine potential risks. If you are in this category, you may
find the process and underwriting time no different than in the
past. Supplemental credit documentation and letters of explanation
may be required before an underwriting decision is made. You may
still be able to obtain "A" pricing, but loan closing may take
longer than if you had a higher score.
If you have a FICO score below 620, you may not be eligible
for the best loan rates and terms offered. Mortgage professionals
may divert you to alternate funding sources other than Fannie Mae
or Freddie Mac. You may find loan terms and conditions less
attractive than "A" credit loans, and it may take some time before
a suitable funding source is located.
If you do have negative information on your credit report, such as
late payments, bankruptcy, or too many inquiries, your best
strategy may be to pay your bills and wait. Time is often your
best ally in improving credit.
The length of time to rebuild your score depends on the reason
behind your low score. Most decreases in scores are due to the
addition of a new element to your credit report such as a
delinquency or an inquiry. These new elements will continue to
affect your score until they reach a certain age. Delinquencies
remain on your credit report for seven years. Most public record
items remain on your credit report for seven years, although some
bankruptcies may remain for 10 years and unpaid tax liens remain
for 15 years. Inquiries remain on your report for two years.
While many lenders use these scores to help them make lending
decisions, each lender has its own strategy, including the level
of risk it will accept for a certain loan product. There is no
single "cutoff score" used by all lenders and there are many other
factors used to determine your eligibility and interest rate.
By law
you can order your credit reports at least once a year for FREE.
This will allow you to see exactly what's being reported about you
by the credit bureaus.
EQUIFAX INFORMATION SERVICES, LLC
P.O. Box 740256
Atlanta, GA 30374
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TRANS-UNION, LLC
Post Office Box 2000
Chester, PA 19022
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EXPERIAN INFORMATION SOLUTIONS, INC.
National Consumer Assistance Center
P.O. Box 2104
Allen, TX 75103
