April 14th, 2011 3:35 PM by Richard T. Cirelli
What You Don’t Know About Credit Scoring:
We all know that Credit Scoring is critical to mortgage loan underwriting. But how much do you really know about Credit Scoring? I found a website that tests your knowledge and I’ll bet you don’t know as much as you should. Before you click on the link below to test your knowledge, let me first make sure you are aware of the following:
· The average score on the 25-question quiz is only 60%
· Groups that scored the lowest are the elderly and lower income
· 67% of people between the ages of 34 and 45 only got 67% right
· 66% of people with incomes over $100,000 only got 66% right.
Here’s the link: http://www.creditscorequiz.org/
It’s also important to know that the mortgage industry only uses FICO scoring, not VantageScore or any other model.
There are two general types of credit scores—generic scores and lender-specific scores. Generic scores are available to all consumers through the credit bureaus, through FICO, and through independent websites. They give consumers an idea of their general credit risk and, thus, whether they can get credit and whether it will be expensive. Lender-specific scores, which may not be available to a borrower, are computed by individual lenders and are the basis for their decisions whether to offer credit and at what price.
Scores using the FICO scale, which range from 300 to 850, are usually good if they are over 700. And scores using the VantageScore scale, which range from 501 to 990, are usually good if they’re over 800.
There are three credit repositories that act as a clearing house for your credit information: Experian, TransUnion and Equifax.
As a general rule, mortgages can be obtained with scores as low as 620 but with most loan programs and lenders, there is a premium to pay if your score is below 700.
Mortgage Rate Update:
Mortgage rates have traded in a narrow range over the past few weeks – bouncing up or down about .125% every few days. 30-Year fixed rates are still just under 5% and the ARM’s are even lower. The purchase market has been stronger then the refinance market.
Products getting a lot of attention are FHA loans with just 3.5% down payments and Jumbo loans above $1,000,000. That implies that homes in both the low end and the high end are getting bought and sold and you can’t believe everything you read in the papers or hear on the news.