- If you have a score of 620 or above, you may be considered an A+ borrower. Your loan will involve basic underwriting,
probably through a computerized automated underwriting system and could be completed within minutes. If you are in this
category, you have a good chance of obtaining a low interest rate and closing your loan quickly.
- If you have a score below 620 but above
580, an underwriter will probably take a closer look at your file to
determine potential risks. If you are in this category, you may find the process and underwriting time no different than
in the past. Supplemental credit documentation and letters of explanation may be required before an underwriting decision is
made. You may still be able to obtain "A" pricing, but loan closing may take longer than if you had a higher score.
- If you have a score below 580, you may not be eligible for the best loan rates and terms offered. Mortgage professionals
may divert you to alternate funding sources other than
Fannie Mae or Freddie Mac. You may find loan terms and conditions less
attractive than “A” loans, and it may take some time before a suitable funding source is located.
The length of time to rebuild your score depends on the reason behind your low score. Most decreases in scores are due
to the addition of a new element to your credit report such as a delinquency or an inquiry. These new elements will continue to
affect your score until they reach a certain age. Delinquencies remain on your credit report for seven years. Most public record
items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens
remain for 15 years. Inquiries remain on your report for two years.
While many lenders use these scores to help them make lending decisions, each lender has its own strategy, including the level
of risk it will accept for a certain loan product. There is no single “cutoff score" used by all lenders and there are
many other factors used to determine your eligibility and
interest rate.
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