making judgments on the basis of credit score

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I can only assume that a particular credit score is good or bad seeing situations faced by others. But how the lenders are fixing up rates and judging whether a borrower is a credit risk from that number?

blue · Posted: Mon Mar 27, 2006 1:53 pm Post subject:

Different lenders have their own standards for judging a borrower. However, generally anything below 620 is considered as a bad credit score to qualify.

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Your score is a summary of your credit history and it is a powerful indicator of the probability of a borrower defaulting on a loan.

So, the lenders charge a higher rate to the borrowers with low scores to maintain a sound business.

jameshogg · Posted: Mon Mar 27, 2006 2:05 pm Post subject:

I can understand your doubt. Actually judging a credit score and analyzing it by an ordinary person not associated with the mortgage industry is difficult.

But those, who are associated well with this industry, can interpret the numbers of your score. They can find out on a particular amount of a loan for a specific period of time, the down payment required and the interest rate to be charged.

Your score also reflects the amount you owe to the creditors, your assets, your income and expenses.

Bill · Posted: Mon Mar 27, 2006 3:06 pm Post subject:

Donna,

All lending decisions are based on the risk of lending the money to the applicant (ie: will the borrower pay back the money). Credit scores are a proven vehicle to help determine this risk.

The following list contains some of the many factors that can affect final mortgage rate pricing for the individual borrower. Please understand that each listed item is combined with all other applicable items for final pricing - making each scenario borrower specific:

• Consumer Credit Score (this is where we always start)
• Type of Transaction (Purchase, Refinance, Cash-out, etc.)
• Type of Loan Program (Conforming, Government, etc.)
• Type of Rate (Fixed, Adjustable, etc.)
• Loan Term (ie: 30 year, 15 year, etc.)
• Loan-To-Value (Loan Amount vs. Value of Property)
• Loan Amount
• Taxes and Insurance Escrowed
• Occupancy
• Type of Property
• Type of Zoning
• Location of Property (programs can vary by State & zip code)
• Type of Income Documentation
• Type of Employment (Employee, Self Employed, etc.)
• Time on Job (or same line of work)
• Customer Debt-To-Income Ratio (Income vs. Expenses)
• Amount of Reserves & Assets
• Lock Term (ie: 30 days, 60 days, etc.)

Hope this information assists you on your desire to better understand how lenders determine your rates of interest and qualifications for acquiring a mortgage loan.

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