Crediti Score Definition: A credit score is a numerical value that ranks individuals according to their credit historyi at a given pointi in time. Your credit score is based on your past payment history, the amount of credit you have outstanding, the amount of credit you have available, and other factors. According to Fannie Maei, one of the major investors in home loans, credit scores have proven to be very good predictors of whether a borroweri will repay his or her loan. Understanding your credit reporti score before you apply for a home loan can save you lots of time and money in the end.
Credit score will place borrowers in one of three general categories.
First, a borrower with a credit score 680 and above may be considered an A+ loan. The loan will involve basic underwritingi, probably through a "computerized automated underwriting" system and be completed within minutes. Borrowers falling into this category may have a good chance to obtain a lower rate of interesti and close their loan fairly quickly, usually within a couple of days of getting all the information together.
Second, a credit score below 680 but above 580 may indicate underwriters will take a closer look at the file in determining potential risks. Borrowers falling into this category 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. Loans within this FICO scoring range may allow borrowers to obtain "A" pricing, but loan closingi may still take several days or weeks as it does now.
Third, borrowers with a credit score below 580 may find themselves locked out of the best loan rates and terms offered. Fortunately, mortgagei professionals can divert these borrowers to alternate funding sources other than FNMAi and FHLMCi and still get them competitive terms. If this is the case for you, may we suggest you apply for help with a credit repair service.
As more companies utilize credit scoringi, the loan approval and closing time will be compressed for most consumers. In the future, a high FICO score may be your ticket to a speedy and competitively priced mortgage loan.
In a nutshell, your credit score is a statistical method of assessing the credit risk of a loan applicant. The credit score is a number that rates the likelihood an individual will pay back a loan. The credit score looks at the following items: past delinquencies, derogatory payment behavior, current debti level, length of credit history, types of credit, and number of inquiries.
