Credit Scores Explanation

All loans must have a credit report to determine a borrower’s credit history. This report is used to determine a person’s credit experience and their willingness to pay their debts. This information tells the lender the risks of making you a new loan. The mortgage industry has undergone a change in credit reporting that involves not only looking at the borrower’s credit history, but also their credit scores. The credit rating is simply a statistically-based tool to assess the likely future performance of a borrower. This is accomplished by applying different weights to certain features on a credit report that have value in predicting future behavior. Statistical analysis is applied to these values ​​and used to calculate a risk score.

In today’s mortgage world, most investors require at least one FICO score, but most require three credit scores. Scores are new to traditional home loans, but have been used since the 1950s in auto financing, the personal finance industry, and credit cards. The risk scores are generic models developed in conjunction with the three major credit deposits: Experian does the FICO score, Equifax does the Beacon, and TU does the Emperica. The agencies provide access and delivery of scores to the lenders with the actual credit report. As an industry, mortgage lenders refer to this group of credit rating codes as the FICO score. A minimum score of 620 is required for any conventional loan underwritten according to the FNMA and FHLMC guidelines. Scores below 620 should pay extra points at best or use non-compliant (subprime) investors. The best mortgage rates and highest loan-to-value values ​​are available only for high credit scores. (700+) Borrowers with a bankruptcy, open collection accounts, late payments, higher than average balances on open accounts, bonds, judgments, old collection accounts or other derogatory credit of any kind should be evaluated and placed with the investor appropriate. A determination must be made at the beginning of the application by obtaining a credit report on file for a fee of $ 18.00. In many cases, an In-File will suffice; however, if a full report is required, the cost will be approximately $ 55.00, which includes a full update of all credit accounts.

If a borrower has a good credit history and a good credit score, they are generally placed in an A-paper (Prime) category. With less than excellent credit or a low credit score, the borrower may fall into categories ranging from A to B, C, and D. Interest rates for categories below “A” are higher and generally require a higher down payment or more principal. In the House. Whenever a borrower’s credit appears damaged, we give them a copy of our Credit Repair Letters to begin the process of cleaning up their credit. It can even be the case for good or excellent credit, as it is estimated that 96% of credit files have errors. If credit cannot be repaired immediately, the strategy is to place the client on a band aid loan. This helps the borrower to obtain a loan for two or three years while good credit is restored. Once cured, we roll them over to an “A” product for a better price. Just five years ago, these loans weren’t even available. Now we can help people that we couldn’t before. This requires some planning and coordination, but the results are usually phenomenal.

Credit bureau risk score factor reason codes
(Numbers are the codes shown on your report)

The amount owed on the accounts is too high (01)

Account delinquency level (02)

Very few revolving bank accounts (03)

Ratio of loan balances to loan amounts is too high (03)

Too many revolving bank or national accounts (04)

Lack of recent information on installment loans (04)

Too many accounts with balances (05)

Too many consumer finance company accounts (06)

Account payment history is too new to rate (07)

Too many inquiries in the last 12 months (08) (Be careful with this one, it can ruin your score while buying a car or mortgage.)

Too many recently opened accounts (09)

The ratio of balances to credit limits is too high in revolving bank accounts or other revolving accounts (10)

The amount owed on revolving accounts is too high (11)

Duration of the establishment of revolving accounts (12)

Time since the crime is too recent or unknown (13)

Time Counts Have Been Established (14)

Lack of recent revolving bank information (15)

Lack of recent information on revolving accounts (16)

No recent information on non-mortgage balance (17)

Number of delinquent accounts (18)

Very few accounts currently paid as agreed (19)

Date of last consultation too recent (19)

Time since derogatory public collection or record is too short (20)

Amount past due on accounts (21)

Serious crime, derogatory public record, archived gold pickup (22)

Number of revolving bank or national accounts with balances (23)

No recent revolving balances (24)

Duration of installment loans (25)

Number of revolving accounts (26)

Number of revolving bank accounts or other revolving accounts (26)

Number of retail accounts (27)

A few accounts currently paid as agreed (27)

Number of accounts established (28)

No recent bank card balances (29)

Date of last recent consultation (29)

The time since the most recent account was opened is too short (30)

Very few accounts with recent payment information (31)

Amount owed for delinquent accounts (31)

Lack of recent installment loan application (32)

The ratio of loan balances to loan amounts is too high (33)

Amount owed for delinquent accounts (34)

Payments due on accounts (36)

The duration of open installment loans has been established in relation to the length of the consumer’s record (37)

Serious crime and public record or collection filed (38)

Serious Crime (39)

Derogatory public record or archived collection (40)

No Recent Retail Balances (41)

Time since the most recent consumer finance company account was established (42)

Lack of recent information on home loans (43)

The ratio of balances to mortgage loan amounts is too high (44)

Very few accounts with balance (45)

Number of inquiries from consumer finance companies (47)

Lack of recent information on retail accounts (50)

Amount Due on Retail Accounts (56)

Lack of recent auto loan information (97)

Period of time in which loans from consumer finance companies were established (98)

Lack of Recent Auto Loan Information (98)

Lack of recent information on auto finance loans (98)

Lack of recent information on the accounts of consumer finance companies (99)

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