CREDIT – THE SCORE ITSELF
The rating goes from zero to in the 850’s. To find a score on either end of the scale is extremely rare (unless there is no score at all – which would automatically be 0). FHA has some special rules when it pertains to credit scores so we suggest you discuss this with one of the Professional Mortgage Brokers or Lenders to see what can be done for an FHA loan.
BELOW 500 – Scores below 500 are an extreme credit risk and it is very rare to find a lender who will make loans to these individuals. These individuals never seem to make payments in a timely fashion, or some catastrophic situation occurred in their lives.
500 to 549 – Still a very poor risk; most Lenders will not accept these scores. Previously there were lenders in the industry referred to as B/C/D Lenders (because of the grade of credit) who would make loans to these individuals. Currently, there are no lenders available in this category for borrowers with these scores. With these scores one should seek assistance in improving their credit.
550 to 599 –These borrowers need to work on improving their credit. They might not be able to find financing until they improve their credit scores.
600 to 649 – ALT-A Lenders thrive on capturing this market niche with competitive rates and do very well for themselves. (Mortgage Brokers are generally the only way to finding ALT-A type Lenders.)
650 to 699 – People with these scores have an excellent chance of getting a loan. They may have had a few late payments on minor accounts, maybe a few charge-off medical
bills or even high balances on credit cards. Overall, they are considered a good credit risk and are open market for all Lenders.
700 and up – If you have made it to this level, you can get credit anywhere…well, up to 99.9% of the time anyhow. These scores generally have no late payments showing, so the Lenders believe you understand how to manage money wisely. Lenders feel very comfortable loaning money to someone in these credit ranges. This market is taken care of by what is called A+ Lenders and they may have special programs available for people with these credit scores.
Each credit scoring category has Lender specific programs. That is why there are 3 major lender-type companies… A+, A-, B/C/D. They all have their own specialty so shop for the best program to fit your particular needs. So, unless you know exactly what you are looking for, you would use the services of a Mortgage Broker to do the shopping for you.
Look at the scoring. The higher the score, the better the interest rate. When you discuss interest rates to your Mortgage Broker/Lender, you should be able to see that a “D” credit score wouldn’t get the same risk factor as an “A” credit. This is a big factor in determining your interest rate.