Credit Scores – Why should I care?
- Credit scoring is a quick, accurate and consistent scientific method of assessing credit risk.
- The scores are based on data about an applicant’s credit history and payment patterns in a credit bureau’s file on that applicant.
- A score is based on data rather than human assessment and judgment.
- CREDIT SCORES CAN AND DO CHANGE.
What are the credit standards for mortgage loans?
- 12 months of on time payments for 3-4 pieces of credit
- Must have two years of good credit after filing bankruptcy
- Cannot currently be in consumer credit counseling program
(FHA will allow it if you are in the agreement with one year of on time payments)
- If you do not have an established credit history with the credit bureaus, you may qualify with alternative credit.
Alternative Credit – What is it?
- Any accounts that you pay on time that do not report to the credit reporting agencies.
- Telephone Bills
- Rent payments
- Cable TV
- Local stores (grocery, furniture, gas stations)
Proof of payment:
- Cancelled checks – minimum of 12 consecutive months
- Money order receipts – minimum of 12 consecutive months
What is a Good Score?
- 740 to 800 = Excellent
- 680 to 740 = Very Good
- Below 620 – Traditional lending is harder to obtain; special, higher-priced options may be available
Things That Affect Credit Scores
- Payment History – late vs. on-time payment, collections, judgments & bankruptcies
- High credit account balances lowers credit scores
- For more information on credit scoring: www.myfico.com
(Look for the About Credit Scores tab)