Past payment history used to be a major factor lenders considered when deciding whether to lend money. Today, more lenders look at the relationship between credit scores (FICO) and mortgage delinquencies.
The chart below shows the likelihood of a 90-day delinquency related to specific FICO scores.
FICO Score Odds of a Delinquency
595 2.25 to 1
600 4.5 to 1
615 9 to 1
630 18 to 1
645 36 to 1
660 72 to 1
680 144 to 1
700 288 to 1
780 576 to 1
So while about 50% of borrowers with scores below 595 became delinquent, borrowers with scores about 700 are a good bet for lenders. And because lenders often reward borrowers by reducing the cost of a loan, it pays to have a good FICO score.
FICO, which stands for Fair Isaac & Company, scores are generated by three major credit bureaus TRW (Experian), Equifax, and Trans-Union. Because each bureau places emphasis on different factors, scores can be different for each agency, but FICO scores range from 350 to 850.
Delinquent payments, too many new credit accounts opened within the past 12 months, limited or no credit history, being maxed on the balances related to revolving credit and public records (tax liens, judgments or bankruptcies) impact your FICO score. And because too many recent credit inquiries can negatively impact your credit score, when you are looking for a mortgage or shopping for any big-ticket item that might require the potential lender to run a credit inquiry, try and settle on a lender before allowing numerous firms to run your credit.
To keep your credit healthy, pay your bills on time, limit your credit use, don’t apply for unnecessary credit cards, don’t max out your credit cards and limit credit inquiries.
If you have questions about your credit and financing, HomeLoan123.com is ready to help.
Keeping you informed.
Doctor Mortgage
To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com
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