Guide to Understanding Credit Scores

Credit scores are numeric figures used to represent the probability as to a person’s likelihood that he/she will repay a loan. This figure is determined through a statistical method that was originally designed by the Fair Isaac Company (FICO), and is why this number if referred to as your FICO score. The three main credit reporting agencies that calculated credit scores are Equifax, Experian, and TransUnion. Lenders look at the credit scores provided by these three companies as a means of accessing your ability to repay a loan. In fact, this information often helps lenders determine whether you not to approve the loan. It also helps determine how quickly the loan is process and what type of interest rate is applied to the loan.For more information inverness il homes for sale.

With this much at stake, it is important that you understand credit scores and what these scores mean to your ability to find acceptable funding. The credit report looks at several factors, including late payments, past delinquent accounts, current level of debt owed, types of current credit available, length of credit report history, and number of inquiries for your specific credit report. The credit reporting agencies use a variety of formulas and calculation to rate each person’s credit report with a score, known as a FICO score. The FICO score can run anywhere from 300 to 850 points, with 850 points being the highest score possible. 

A person applying for credit is placed into one of the following three categories based on their specific credit score.

1. An A+ rating is considered any FICO score over 680 points. If you have a credit score that is higher than 680 points, you can expect to be approved for credit and complete the entire loan process within just a few days. With a credit score in the A+ range, your loan application will probably be processed through a computerized automated underwriting system, which could take as little as just a few minutes. Even if the loan application runs through a standard underwriting process, you should have approval pretty quickly. This high level of credit rating also should offer you a lower interest rate on your mortgage.

2. A credit score that falls between 620 points and 680 points is still considered good credit and is likely to be high enough to be approved for the loan. The underwriting process, however, will take longer because they will have to take a closer look at your credit history. You may be asked to provide additional information or letters of explanation for any negative items listed on your credit report. This process is likely to take several days or possibly even several weeks to complete. The best thing you can do is to provide any information requested by the underwriter in a timely fashion. Depending on the determination of the underwriter, you may still be eligible for the lower A grade interest rates.

3. If your credit score is below 620 points, the underwriter is definitely going to take a closer look at your credit history. This process may take several days, weeks, or even months to complete. The underwriter may require additional information based on what is listing on your credit report. If you have a score below 620 points, you may not be eligible for low interest rates and some of the terms and conditions of the loan may be good as those offered to people with higher credit scores. Depending on the results of the underwriting process, you may also be directed to one of the alternative loan options, such as FNMA (Fannie Mae) or HHLMC (Freddie Mac).

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