Credit Scores Are Changing and It’s Getting Ugly

Fair Isaac Company (FICO) issues a numeric score to indicate an individual’ s overall credit worthiness, taking into account a variety of factors as reported by the three major credit report companies – Experian, Equifax, and TransUnion.

Credit Scores range from 300 – 850

When a lender is looking at these scores they are determining the risk associated with the loan. The more risk, the higher the cost of the loan, or perhaps you will not get a loan at all. There is a difference in how they look at these scores if they are affiliated with loans that are conventional, FHA, or VA. What follows is a summary of their determination of scores.

Under 600 – Most likely will need to use programs that are NOT FICO driven as this score would give underwriting extreme concern.

600-620 – High risk, will require careful review by underwriter.

620-660 – Cautious Risk

660-680 - Standard, has higher consideration for approval

680-699 – Good

700-739 – Excellent

740 and above is considered Excellent and is automatically moved to underwriting. NOTE: 720 & BELOW IS EXTRA COST, i.e., the loan rates and fees will be higher.

FHA loans will become popular because a loan can be had with a credit score of 620 without extra costs. This looks like it will be a moving target too. One of the more liberal banks, Flagstar, just moved to 640 in early October, 2009.

If you want to know how this all happens, look for our next report on, “Taking the Mystery Out of Credit’”

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