Posted on: 05th Aug, 2005 06:16 am
Mortgage lenders use a credit score in order to determine whether you can qualify for the loan. The score is based on the information that is provided on your credit report. This score is taken into account while charging the interest rate on your loan. And, if you can maintain your credit score, then you will be saving a huge sum in the interest.
Each and every lender sets his own criteria including the credit score required for approving mortgage loans. Lenders also consider the debt-to-income ratio while judging your financial strength of paying off the loan. Based on your credit score and debt-to-income ratio, lenders provide you with a credit rating that proves how creditworthy you are.
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How do lenders rate you on the basis of credit score?
Each and every lender sets his own criteria including the credit score required for approving mortgage loans. Lenders also consider the debt-to-income ratio while judging your financial strength of paying off the loan. Based on your credit score and debt-to-income ratio, lenders provide you with a credit rating that proves how creditworthy you are.
| Rating | A | B | C | D | E |
| Credit Score | 660 or higher | 620 to 659 | 580 to 619 | 550 to 579 | Below 550 |
| Debt-to-Income Ratio | Lower than 35% | Around 50% | 55% or higher | Around 60% | Around 65% |
| Late Payment | |||||
| Mortgage | No late payment for past 2 years. | 30 days late for once or twice in past 1 year. | 30 days late for 3 to 4 times in past 1 year. | 30 days late for 2 to 6 times and 60 days late for once or twice in past 1 year. | Late for 20, 60, 90 and/or 120 days. |
| Installment Loan | 30 days late for once within past 2 years. | 30 days late for 2 to 4 times during last 1 year. | 30 days late for 4 to 6 times during past 1 year. | Few 90 and 120 days late payments since past 1 year. | Late for 20, 60, 90 and/or 120 days. |
| Revolving credit | 30 or 60 days late for once in past 2 years. | 30 days late for at least 2 times in last 1 year. | 60 days late for 2 to 4 times in last 1 year. | Few 90 and 120 days late payments since past 1 year. | Late for 20, 60, 90 and/or 120 days. |
| Other Criteria | Good credit profile for last 5 years, no bankruptcy within the last 10 years. | No 60-day late payment. Discharged from bankruptcy 4 years ago. | Discharged from bankruptcy 2 years ago. | Discharged from bankruptcy within last 1 year. | Bankruptcy or foreclosure. |
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How do lenders rate you on the basis of credit score?
Your credit history summarizes most of the types of credit you use, including credit cards, loans and financing plans. It also shows whether you have made your payments on time.
Your credit history is based on information sent to the two credit-reporting agencies in Canada, Equifax and TransUnion from businesses that have given you credit. When you want to borrow money, the lender will usually check your credit history with these agencies, also known as credit bureaus.
You build a good credit history by consistently making payments on your credit cards and other loans on time. If you have no credit history, or a bad credit history, you will have more difficulty borrowing money, especially large amounts such as a mortgage.
The credit reporting agencies provide information about your credit history in two ways: as a credit report and a credit score.
Your credit history is based on information sent to the two credit-reporting agencies in Canada, Equifax and TransUnion from businesses that have given you credit. When you want to borrow money, the lender will usually check your credit history with these agencies, also known as credit bureaus.
You build a good credit history by consistently making payments on your credit cards and other loans on time. If you have no credit history, or a bad credit history, you will have more difficulty borrowing money, especially large amounts such as a mortgage.
The credit reporting agencies provide information about your credit history in two ways: as a credit report and a credit score.
Thanks for the info creditthreesixtyconsultin!! :)
Hi Jessica,
Thanks for posting the list of credit score table here. Now we can find out our credit score here now easily as well newbie member here. Hope this will be updated always.
Thanks for posting the list of credit score table here. Now we can find out our credit score here now easily as well newbie member here. Hope this will be updated always.
Glad to know that you liked it!! :)
The credit score is a value which is generated by a mathematical algorithm. This algo is based on information available on your credit report. The information is compared to the info as available on tens of millions of other people. The number generated is a highly accurate prediction of how likely you will be able to pay your bills.
The scale runs from 300 to 850. People mainly have scores between 600 and 800. A score of 720 or higher will get you the most favorable to get good interest rates on a mortgage.
Below are the samples rating: (according to data from Fair Isaac Corp.)
Credit score Percentage
499 and below 2%
500-549 5%
550-599 8%
600-649 12%
650-699 15%
700-749 18%
750-799 27%
800 and above 13%
The scale runs from 300 to 850. People mainly have scores between 600 and 800. A score of 720 or higher will get you the most favorable to get good interest rates on a mortgage.
Below are the samples rating: (according to data from Fair Isaac Corp.)
Credit score Percentage
499 and below 2%
500-549 5%
550-599 8%
600-649 12%
650-699 15%
700-749 18%
750-799 27%
800 and above 13%
Hi Jessica! Thank you for this very clear explanation. The best rule that I follow though to keep my credit score in good shape is to simply pay my loans, credit card balances and other bills in full and on time every month. It's the very basic rule but it works!
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