Credit score primer: What buyers need to know to get a loan
Details are below on credit score basics. Credit scores continue to be a critical detail in determining what type of loan & interest rate one qualifies for. Lender criteria can vary.
As of 3/09 FHA lenders require scores of:
620: conforming loan amounts (</= $417K)
680: high‐balance loan amounts (> $417K)
As of 12/10/09 : one needs 20% down & a score of 740+ for competitive conventional rates.
For current requirements, check in with an experienced mortgage broker or loan officer. I’m happy to make recommendations if needed.
Download a detailed booklet on understanding your credit score as provided by myfico.com: Understanding your FICO score
As per the The Dallas Morning News, Pamela Yip (12/03/07):
– In the wake of the credit crisis, lenders have become much pickier about whom they lend to. Here are some basic facts that will help potential borrowers understand what they face.
The measurement that most lenders use to assess applicants’ credit risk is the FICO score developed by Fair Isaac Corp. The score ranges from 300 to 850.
There’s not one FICO score. Buyers have three: one for each of the three credit bureaus, Experian, TransUnion and Equifax.
Each credit score is based on information the credit bureau keeps on file. Since credit bureaus don’t share their data with one another, the three FICO scores may differ, sometimes by as much as 100 points.
The components of a FICO score are:
• Payment history: 35 percent
• Amounts owed: 30 percent
• Length of credit history: 15 percent
• New credit: 10 percent
• Types of credit used: 10 percent
A consumer with a 580 credit score might qualify under FHA requirements, but, generally, in order to qualify for a prime loan, a borrower must have a credit score above 620 for a conventional loan at all, and above 720 for a loan at terms and rates most borrowers would consider desirable.
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