Grade Your Credit
Did you know that 75% of all mortgage lenders use a three-digit credit score to
determine your loan eligibility? This score is based on the information
contained in your credit report. And the interest rate you will be charged is
based on your credit score, so raising your credit score as little as 15 points
could result in a lower interest rate and thousands in savings. You can save
anywhere from a few hundred dollars in credit card interest charges, thousands
of dollars on your next car loan, and tens of thousands of dollars on a
mortgage loan simply by improving your credit score as much as possible.
The information below offers general guidelines as to what your credit score
might be. Each lender sets its own guidelines for approving loans and issuing
credit. For this reason, the information below offers only general guidelines.
Your debt-to-income ratio also plays a role in determining whether or not you
will be issued credit. Some lenders require a debt-to-income ratio that may be
higher or lower than those stated below. See bottom of this page to find out
how to calculate your debt-to-income ratio.
The information below is based on the FICO scoring model which ranges from
about 375 to 900. Other lenders might use their own in-house scoring systems or
another scoring model. General rules to determine your credit score and
creditworthiness are as follows:
A rating [Credit score 660 or higher] -- You can easily obtain financing at the
best rate; you can get approved for a credit card online in a few seconds. Note
that a score above 700 means you have extremely good credit.
Typical debt- to- income ratio: Below 35%
Mortgage: You have not been late with a payment in the last 24 months
Installment loan: You have been 30 days late making payments 0 or 1 time within
the last 12 to 24 months
Revolving credit: You have been 30 or 60 days late with a payment 0 or 1 time
in the last 12 to 24 months
Additional requirements: Good/excellent credit during the last 2 to 5 years; no
bankruptcy within the last 2 to 10 years
B rating [Minimum credit score 620] You can get approved, but not at lowest
rate. You can get credit cards and such, but at a higher rate than someone with
an A rating.
Typical debt-to-income ratio: Around 50%
Mortgage: You have been 30 days late with a payment 2 or 3 times in the last 12
months
Installment Loan: You have been 30 days late with a payment 2 to 4 times during
the last 12 months
Revolving credit: You have been 30 days late with a payment 0 to 2 times in the
last 12 months
Additional requirements: You have no 60-day late mortgage payments; if filed
bankruptcy, it must be discharged 2 to 4 years ago
C rating [Minimum credit score 580] Have trouble getting approved. Very high
rates. The lender might ask you to get someone to co-sign for you.
Typical debt-to-income ratio: 55% or higher
Mortgage: You have been 30 days late with a payment 3 or 4 times in the last 12
months
Installment Loan: You have been 30 days late with a payment 4 to 6 times during
the last 12 months
Revolving credit: You have been 60 days late with a payment 2 to 4 times in the
last 12 months
Additional requirements: If you filed bankruptcy, it was discharged 1 or 2
years ago
D rating [Minimum credit score 550] Serious trouble getting approved. Co-signor
required.
Typical debt-to-income ratio: Around 60%
Mortgage: You have been 30 days late with a payment 2 to 6 times in the last 12
months; and 60 days late 1 to 2 times during the last 12 months
Installment Loan: You have a few 90 and 120 day late payments during the last
12 months
Revolving credit: You have a few 90 and 120 day late payments during the last
12 months
Additional requirements: If you filed bankruptcy, was discharged within last 12
months
E rating [Credit score under 550] Unlikely to be approved.
Typical debt-to-income ratio: Around 65%
Mortgage: You have a pattern of 20, 60, 90 and/or 120 day late payments
Installment Loan: You have a pattern of 20, 60, 90 and/or 120 day late payments
Revolving credit: You have a pattern of 20, 60, 90 and/or 120 day late payments
Additional requirements: You may have a current bankruptcy or foreclosure
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