WHAT IS A CREDIT SCORE?
Simply stated, credit scores are a statistically-based tool to assess the future performance of a borrower. Scores are derived from the history of a borrower as it is reported to the credit repositories from any creditor. Credit scores are a proven indicator of the likelihood to repay a loan or credit obligation. The lower the score; the more risk from a borrower to repay a loan, on time and in full. Scores range from 400 to 850.
This process was started by Fair, Isaac and Co., which is why credit scores are also called FICO scores.
WHAT AFFECTS A CREDIT SCORE?
Keeping a manageable amount of debt and paying on time are ways to positively affect a credit score. Bankruptcy, judgments, collections, high credit balances relative to high credit limits and recent late payments affect scores. Scoring factors are “blind” and do not consider anything about an individual other than their creditworthiness. Credit inquiries can ‘ding’, or lower your score. However, any inquiries from one industry within a 30-day period count only once. For example, if a consumer is car shopping and visits three dealers in two weeks who check the consumer’s credit, this only counts as one inquiry and has a minor affect on the credit score.
MORTGAGES AND CREDIT SCORES
Often, underwriters use credit scores as a factor in determining loan approval. This is not the only factor considered, but a credit scores plays a significant role in the loan decision. Good credit pays off. Some loan programs have credit score requirements or offer lower rates for higher credit scores. For example, a credit score above 720 may merit a 1/8% rate decrease. Borrowers that are financially sound enough to buy a home should receive a “market rate” for their loan. Home buyers with scores below 640 may incur higher rates (1-2% above market) or additional fees. Mitigating circumstances can help your approval process if you have credit issues.
HOW CAN YOU OBTAIN A COPY OF YOUR CREDIT REPORT?
Under federal law, you have the right to obtain a free copy of your credit report from each of the nationwide consumer reporting agencies once a year. To order you’re your free annual report:
By telephone: 1-877-322-8228
On the web: Visit www.annualcreditreport .com
St. Louis MORTGAGE INTEREST RATES for March 24, 2011:
- Conventional 30-Year Fixed 4.750%
- Conventional 15-Year Fixed 4.250%
- Conventional 5/1 ARM 3.50%
- FHA/VA 30 Year Fixed 4.750%
- Jumbo 5/1 ARM 3.50%
- Jumbo 15 yr Fixed 4.250%
- Jumbo 30 yr Fixed 5.50%
Paramount Mortgage is a locally owned Mortgage Banker; we just celebrated our 40th anniversary. Great rates and programs are secondary to what is most desired in a lender relationship. The most sought-after aspects in this industry cannot be easily translated onto paper…learn more about us here.
For more information or if you have questions on mortgage rates you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.
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