FICO CREDIT SCORES
There are three major credit reporting agencies - Experian, Transunion, and Equifax. This is their current ranking of credit scores:
750-840 Excellent
660-749 Good
520-659 Fair
340-519 Poor
339 & Under :(
These rankings are subject to change without notice; please verify with a reputable mortgage lender.
Most banks and mortgage brokers are looking for a minimum score of 620 for FHA; 640 for Conventional. It used to be lower, but again, predatory lenders and their unethical practices caused this figure to change. That number may go up again. About a year or so ago, 580 was acceptable for an FHA
loan - then it changed the first half of 2009 to 600 - now it's 620.
Here's how some negative items/activity can impact your credit score:
Effect on 680 Score Effect on 780 Score
Maxed-out credit card -10 to -30 - 25 to -45
30-day late payment -60 to -80 - 90 to -110
Debt Settlement -45 to -65 -105 to -125
Foreclosure -85 to 105 -140 to -160
Bankruptcy -130 to -150 -220 to -240
If your credit is "less than perfect", a reputable lender can assist you in getting negative information removed from your report. If there's an account that you can prove you've paid off, that's a pretty easy fix. There's also errors that can be found on your credit report from time to time - example: if you have a common last name, like Smith or Jones, more often than you think, someone's information may have inadvertently be added to your report. Be wary of companies that charge you a fee to "fix" your credit. Some of them are legitimate, but many times this assistance can be provided to you at no cost by a good mortgage lender.
Myth: If you have 3, 4 or 5 mortgage lenders pulling your credit, it will lower your score. That's simply not true. If, however, you pull it yourself or credit card companies make inquiries, those inquiries can definitely lower your score. So, don't hesitate to talk to more than one lender to shop rates and terms for your loan.
One more thing - when you are applying for a loan to purchase a home, the type of credit report you or I can get for free isn't going to be sufficient. Mortgage lenders use a tri-merge credit report from the reporting agencies and the middle score is the number they'll work with. There is a fee for a tri-merge report - usually around $50.
I'm fortunate to work with some of the best mortgage lenders in town, and if you ask me to represent you, I'll make recommendations to you. However, the choice of lender is always yours.
