2010 Guidelines on Credit Scores and What it Means to You

Credit borrowers need to understand that there is a relationship between the credit scores they have and what a lender will charge you in an interest rate on a loan for home purchases. The big levels are credit numbers of 580, 620, 660 and 725 and depending on your number it will determine how much the lender will loan you, how much paperwork you will need to satisfy the lender for an approval.

Automated underwriting and credit scoring rule almost all the mortgage decisions for loan approval and the pricing process. Instead of reviewing all the data, the system loads you into the level standard and goes from there.

Understanding the logic of the 2010 rules for loaning is understanding the crisis of the bank lending has been in the past 2 years. Still the rule is the higher the credit score, the less of a down payment you will need to have as your equity base in the home.

Credit Scores are not a new concept at all. The determining factors that all get whittled to the number are based on several factors:

1. Borrowers ability to pay on time past debts. Primary emphasis is placed on the last 2 years.
2. Collection accounts and public records. Medical bills that go to collection, bankruptcies and lawsuit judgments all drag down total scores.
3. Inquiries of your credit will bring down you score over the last 6-12 months. Be careful how many times you apply for a credit card or grant someone access to your particular score.
4. Borrowers’ outstanding balance on credit limits. The rationale for lenders is that if you have used all your credit available, you will have no room to tap into existing lines.
5. Borrower’s use of credit over time. The longer a credit account is open, the better for the score.

Since all studies appear to show that the credit scoring systems accurately predict whether a borrower should be approved for a mortgage loan, both Fannie Mae and Freddie Mac (the two institutions that purchase most mortgage loans nationwide) have adopted credit scoring guidelines for lenders who sell loans to these agencies. While 620 used to be considered an acceptable credit score for Fannie Mae and Freddie Mac, 680 is now considered the minimum score to have acceptable credit for their programs. Those between 620 and 680 in the current market will have to look to the FHA program for a mortgage unless they are making a down payment of at least 20%.

If you are interested in credit scores, then you might need some help restoring your credit. The Public Bank Visa is the fairest deal we have found for rebuilding your credit with a secured Visa credit card. It is a real credit card that if you pay on time will help you increase your credit score on your credit report. Visit Public Savings Bank that could be a way to establish better credit.

In conclusion, review your credit once a year to determine if it is accurate. I have seen on more than one occasion where similar names, have swapped information back and forth on a credit score, for example a Father to a Son.