What rating does your credit score have?

November 14, 2006 | Credit | 34 comments

Mortgage programs are categorized by credit score (among many other things) and the rate you are quoted is based on what category your credit score will put you in. Here is a general breakdown of how your score is rated:

800 - 850 = A+ Paper. Excellent. Worthy of all discounts available. Strong borrower file worthy of special pricing considerations for the ease that this file will be to process.

720 -799 = A Paper. Very Good. Worthy of the best rates available and at very competitive cost structures.

Not sure what you credit score is? Click here to get an estimate.

680 - 719 = Alt A paper. Good credit. This file will get very good rates and competitive cost structures at about .25 - .50% higher than a 720 score, and in some cases this also means a lower loan amount, or lower loan - value ratio they will allow. If there is no derrogatory info causing the score then it is usually under 700 here because of high consumer debt and the affect it has on the scores. A quick 1 week rescore can put this file over 720 and into the best rates available.

620 - 679 = B Paper. Fair credit. This can still be your score if you have high credit card debt and never made a late payment. Again, a quick rescore and we can get a major improvement here. The score may also reflect derrogatory info that needs to be addressed. This may mean lender excpetions which will require significantly more work on the broker’s side and as a result higher costs. Whether it is derog info or high balances the lender views this as higher risk and it will come with a higher rate (anywhere from 1% - 2% higher than an A paper rate, depending on many variables).

580 - 619 = C Paper. Poor Credit. Now we are getting into files with issues that require more attention and a lender that knows there stuff. They will be working hard to get these approved and will charge accordingly. Your strength will be in having good answers for whatever needs to be explained. This rating will cost you 2 - 3% higher rate. There are still a few that have these scores simply because of high consumer debt and not recent lates.

500 - 579 = D Paper. Very Poor Credit. These are files with definite derrogatory info and issues that require exceptions or special programs with high rate / cost structures/ Expect to pay 3%+ higher than any A paper products and with limited loan amounts and loan - value ratios allowed. Also, usually no stated income allowed at this level.

Less than 500 = Private Money Only. These are private investors willing to disregard the credit and loan up to 70% of the value of the home at a high (10+%) rate for a short, interest only term. This can have very mixed results and can cause more grief than it solves with a very high payment added to your situation. However, if accessing the equity at any cost will payoff the items needed to bring the score to a higher level than this can be used as a solution.

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Reader Comments

Malu Viju on November 24, 2006 at 7:25 pm

My credit score was 18 points within 1 month. why is that? My balance on the credits card are %90 below the crdit limit. I have not been late on the payments wihtin the last 2 years. i have 1 deregatory balance but this has been going on for 5 years.

R M on November 27, 2006 at 6:32 pm

@Malu

I’m assuming you mean that your credit rating dropped 18 points within a month. Have you recently applied for credit? Everytime you apply for credit it’s reported to the bureaus. If you have more than an “allowed” number of inquiries within a certain time period it can drop your score a couple points for each inquiry. If you ultimately open a new credit line after those inquiries then they are ignored.

The formula by which the bureaus decide on your score is a secret so anything explaining your score drop is just a guess. If your balances are high (close to 90% as I gathered from your statement) then you might be getting penalized for having those high balances over a long period of time.

Do you have a separate credit report from each time you ran it or just the scores? If you have the reports, then I’d recommend analyzing them side-by-side to identify any differences.

tom.voli on November 29, 2006 at 5:43 am

Inquiries can be the cause. I have seen as much as 20 point drops for an inquiry but as RM says…the bureaus do not provide any information to give us a clue how the scoring works. We use the experience of hundreds of files to make our assesment. Your score may also go up 18 points simply because of a change in the balance on the cards. You were probably as high in the score as you could be and had nowhere to go but down. Regardless, I am guessing with this sort of payment history you probably have a very good score.

Preparing for refinancing out of an ARM on January 8, 2007 at 11:43 am

[...] 1) You should determine what score you have now and what that will qualify you for. [...]

Terry on February 8, 2007 at 4:42 am

An article about “Need Information about Credit Scores? Try going ONLINE” and other free resources on Credit Score can be referenced at http://www.sohoindex.com/credit-score.

Cheers
Terry

Sherri Gilbert on February 15, 2007 at 12:27 pm

Hi
I am looking for a private investor to do a second mortgage on my home. I am a real estate agent and have just gone through a really bad 6/8 months with my husband not working for almost 5 months, had just built a new house and of course this was when the market went south. My scores have dropped under 500 so I can’t get a second mortgage. We have just gotten really behind and can’t get caught up. I just need someone to help me.

tom.voli on February 15, 2007 at 12:34 pm

This is common in todays market. There are private money sources that will lend up to 75% of the homes value. If your loan to value ratio is higher than that there are very few options. If you need a private money source contact me at (949) 766 5054.

Delores Jackson on April 15, 2007 at 7:13 am

I only have about $5000 that can only be used to buy a house. I wanted to buy a coop for a first time buyer.
My scores are 498/562/563
I am working on paying off my credit but it slow and I have to use my money in the next 30 days because I have to move.
Is there anyway that I can get a loan to buy a house?
could you tell me if you or anyone can help me?

Tom Voli on April 16, 2007 at 7:20 am

Your scores are low for a 100% purchase. The $5000 would likely be needed for closing costs. In addition, the rates you will get at a 562 mid score with 95-100% loan - value are very high (over 9%) and would likely not help.

amy on April 28, 2007 at 6:00 am

My husband and I are looking into buying our first home. Our credit scores are approx. 579/580/596. We don’t have much money to put down, and what little we do have will probably have to go to closing costs. We are looking for 100% financing and a loan of about 300,000. Is there any hope for us? And if so, do you know of any mortgage brokers that may be interested? We make about 90k/year between the two of us. Thank you!!

Tom Voli on April 28, 2007 at 7:04 am

There are programs that will allow for 100% purchase but the rates are horrible at that score. The best thing to do is use what cash you have to improve the scores above 620 which will provide a much better rate. Feel free to contact me and I can walk you through that process. The current real estate market is a buyers market and you should be able to negotiate costs being covered by the seller.

Sandy on May 16, 2007 at 5:33 am

I am looking at house and the seller is willing to help out alot, in fact he told the loan person to work with me as if I have all the money needed. My mid score is 565. The house is 147k, I bring home 42k. Is there companies that will give 100%? I don’t care about the interest rate at this time because I am sure we will get a get re-fin rate next year.

Tom Voli on May 16, 2007 at 6:23 am

Unfortunately no. Your score needs to come up a bit. The best thing to do is determine how that can be accomplished quickly so you can buy the house. Call me at (949) 766 5054 and I will walk you through a rescoring process.

ron on August 10, 2007 at 10:47 pm

hello. start with fico score equifax 623 experian 606 transunion 608. judgement from 2001 from mississippi what are the state laws for that can i have the judgement removed.could i buy a house bought two cars paid no problem credit cards paid on time. all payments on time for the past three years. what do you think

Tom Voli on August 14, 2007 at 7:43 am

Judgments remain on a credit report for at least 7 years in most states, 9 in others. In California for example, the judgment is good for 10 years and can be renewed at the end of 10 for another 10 years. They can haunt you until paid or included in a BK. However, the plaintiff would have to be diligent about enforcing it for it to be effective.

As for buying a house, your scores are low for any type of decent interest rate. You would need at least 10% down payment with those scores.

Angel on August 23, 2007 at 5:35 am

I was listed as an authorized user on accounts for which the individual filed bankruptcy. The individual was a family member, but not a spouse. These accounts have now brought my credit score down considerably. Is there anything I can do to get them removed?

Tom Voli on August 23, 2007 at 6:07 am

If you did not sign anything to take liability then this can be removed. You should seek a credit attorney. They can get it done for around $800.

Bren on October 25, 2007 at 4:33 pm

Hello, Question we are looking to buy a house within around 4 years, our credit score is about 500 on all 3, we have a foreclose showing from 2000 but then states that reported on 2006 when is it coming off? We voluntary gave us as repo on 2001 but why does it show different as opening date and reported date? Is there any hope to raise up our score within 4 years dramatically and if we have around 40,ooo to put down/closing costs? I just want to get rid of that foreclosure.

Tom Voli on October 25, 2007 at 5:16 pm

Getting rid of the foreclosure is not the issue. Once that is 4 yrs old it is not a large factor.

The bigger concern is getting POSITIVE ACCOUNTS on the credit report. You will need 2 major accounts (car loan, credit card with $2000+ limit etc). Your score will not increase much simply by removing the foreclosure which is now old.

nick on November 12, 2007 at 9:43 am

My wife and I are building a new home, going through the loan process right now. She is a stay-at-home mom with about $140 income per month, I work and make about $54k/year. My credit score (median) is 691 and my wifes is 750.00. Our debt ratio with the new house would be approx. 46-47%. We have no credit cards, just student loans and car loans.

With this financial information, would we likely be approved?

nick on November 12, 2007 at 10:27 am

I forgot to add that we will be putting 20% down.

Tom Voli on November 12, 2007 at 1:42 pm

There are a few bits of info needed for that assessment:

1) Total Loan Requested

2) Cash left after purchase

3) W2 wage earner or self employed?

4) Any BK’s or foreclosures in last 4 years?

5) Same job (or industry) for last 2 years with no job gaps?

Nick on November 12, 2007 at 3:51 pm

Total Loan Requested would be $153,400. Purchase price of $191,400.

We should have some cash after the sale of our house, this is not included in the 20% down that we are putting down on the new home.

I am a w2 wage earner.

no BKs or foreclosures at all

I have been in the insurance industry the last seven years.

Tom Voli on November 12, 2007 at 4:53 pm

Yes…you should qualify with no problem. Your scores are good enough to qualify for an acceleration loan where you would have a 30 year loan that would payoff in 10 years. I suggest checking this site I developed for additional info on accelerated mortgages.

http://www.newfoundequity.com/?affid=blog

Karen on February 3, 2008 at 4:22 pm

We are looking to buy a house towards the end of this year. Annual salary of about $40,000, and am looking for a house around $130,000 to $150,000 with 100% financing. Not sure of credit score now but it was at about 500. It has to be better now Nothing new negitive in last year or so and have paid off the biggest negitive item. There are 4 remaining negitives that are about to be paid off and it shows 14 possitive accounts. How long will it take to improve the score enough to buy a house? All bad accounts will be paid off by May and hope to buy around Nov when lease is up if possible.

Jess on February 6, 2008 at 11:26 am

Hi,

My median Credit score is 624. I have two charge-offs on my account from a few years ago from when my mother passed away. One of the charge off’s I was responsible for. However, I was only an authorized user on the other charge off that is listed.

I have two questions:

1. Would it be worth while to hire an attorney to have the authoized user charge-off removed?

2. Also, my husband and I are looking into buying a first home. Approx. mortgage would be 170,000. We have 10,000 for closing costs and down-payment. His credit score is in the 650’s. Will we qualify for a decent loan?

Thanks!

Jess on February 6, 2008 at 11:28 am

Oh, My husband and I make 75,000 per year. We do have significant student loan debt ($600 per month) an auto loan ($300) and credit card ($200).

MM on February 28, 2008 at 6:20 am

I just got pre-qualified for a 242,500 30-yr mortgage (7500 for down payment) at 6.5%. My averaged credit score is approximately 713.

Previously, when I had paid down my credit card balances by a couple thousand, my credit score was up to 736.

If I need to choose between paying off credit cards a bit to get over 720, thereby reducing the down payment amount to ~ 4-5k, and just saving the money for down payment and leaving the credit score at 713, which is better in terms of the rate I will get and the longer term benefits (eg, higher down payment translating to lower overall loan amount).

MM on February 28, 2008 at 6:21 am

Also note, my realtor said closing costs will be covered by the seller.

Tom Voli on May 29, 2008 at 6:59 am

Karen,

100% financing is rarely available these days and at very unfavorable rates. If you do not have at least 10% down payment you should consider waiting until you do.

Tom Voli on May 29, 2008 at 7:01 am

Jess,

There are attorneys that specialize in this and can help remove the negative information for a reasonable fee. Yes it is worth it.

As for the purchase, you should have at least 10% down payment + closing costs to insure a reasonable rate.

Tom Voli on May 29, 2008 at 7:04 am

Your score is sufficient for a good rate, however I am suspicious of a 6.5% rate on over 95% financing. This is all 1 loan? There is mortgage insurance on loans over 80% loan to value unless that is paid by the lender in which case the rates are higher. Something is not complete here.

ashley on July 6, 2008 at 3:29 pm

me and my husband are wanting to get a doublewide within in the next year and a half his credit score is 525. Is there anyway to up our credit score and how hard do you think it would be for us to get approved withthat credit score?

Tom Voli on July 7, 2008 at 10:36 am

Ashley,

It is nearly impossible to get a loan with a 525 score. It reflects significant credit problems which you have not disclosed here.

The best way to bring the score up is to pay all bills on time. If there are collection accounts that are outstanding you should pay those as soon as possible to allow the score to rebound.

It is essential that there are POSITIVE reporting accounts on the report for the score to come up. Simply paying off negative items will not do enough if there are no open accounts that report positive each month.