|
Credit Score Questions
- Explain credit scores and how they affect my ability to secure a loan.
- Can I get a loan if I have had a bankruptcy?
- What can I do if I am young and don't really have much established credit?
- What can I do to raise my credit scores?
Explain credit scores and how they affect my ability to secure a loan.
Credit scoring is a statistical means of assessing risk taking into account a borrower's past payment history, outstanding debt, age of accounts, and the types of credit accounts in use. Credit scores, which range between 300 and 850 points, are not affected by income, assets, and any other non-credit factor. Credit scores above 680 are generally considered good by the mortgage industry. Scores above 720 are considered excellent while scores below 620 may be a clause for concern and affect a borrower's ability to obtain most types of loans.
Back to top.
Can I get a loan if I have had a bankruptcy?
Conventional loans generally require a bankruptcy to have been discharged for specified period of time which may be as long as 4 years. FHA loans generally require a bankruptcy to have been discharged for 2 years. Both types of loans require the re-establishment of positive credit history. There are alternative lending programs with less stringent requirements which tend to have higher interest rates.
Back to top.
What can I do if I do not have much established credit?
Having established credit is very helpful when you are seeking a loan. This helps lenders evaluate your ability to handle debt and make payments on time. You can start to establish credit by securing a credit card, car loan or other type of loan. Then, make timely payments on all your bills. Keep records of payments for phone, other utilities, and rent payments. This will help to document your credit worthiness. Don't make the mistake of thinking that the more credit cards you have the better your credit will be. Most conventional programs look for at least 3 to 4 trade accounts to be reflected on the credit report.
Back to top.
What can I do to raise my credit scores?
Credit scores can be raised by reducing balances on revolving accounts and in some cases by closing accounts. Clearing up erroneous derogatory information is also very helpful as is paying off any outstanding past due balances. As a rule of thumb, an older account with a good payment history and a low balance is better than a new account. Please consult your Signature Mortgage loan office for additional guidance.
Back to top.
|
