Mortgage credit scoring is a scientific method that uses statistical models to assess an individual’s credit worthiness based on his or her credit history and current credit accounts. Credit scoring was first developed in the 1950s, but has come into increasing use in the last two decades. In the mortgage industry, it evolved into widespread prominence in the mid-1990s.

In the decade before this, the three major credit bureaus, Experian, Equifax and TransUnion all worked with the Fair Isaac Corporation to develop scoring models that enable each bureau to offer a score based solely on the contents of that credit bureau’s data about an individual.

Creditors… especially those in the mortgage industry… frequently use the scores when deciding who receives loans. They can order your score, commonly called a FICO score, from each one of the three bureaus, but it only draws upon information from your credit report. Individual mortgage lenders will also consider other information, such as your salary, or how long you have been employed at the same company when making loan decisions.

FICO scores are computer-generated calculations which use information from an individual’s credit report, and include factors such as how much money is owed and whether payments have been made on time. That score is then compared to the credit performance of consumers with similar profiles. The scoring system awards points for each factor that helps predict who is most likely to repay a debt. The total number of points… or the FICO credit score… is then used to predict how likely it is an individual will repay a loan and make payments on time.

Each credit bureau has its own unique system for compiling credit scores. However, the scoring methods have been standardized to some extent, so a numerical score at one bureau is somehwat equivalent to the same numerical score at another. Thus, a score of 640 from Equifax indicates the same credit worthiness as a score of 640 from TransUnion or Experian, even though the calculations used to determine those scores are different at each bureau.

Because most individuals will have three different scores from each of the credit bureaus, it’s the universal and standard practice in the mortgage industry to view all three credit reports and accompanying scores through what’s called a tri-merged report. They then use the middle score of the three scores as the borrower’s qualifying score. This is why you may be asked about your knowledge of your midscore FICO. It’s this three digit number which determines whether you get approved for a mortgage and on what terms.

Credit scores range from 350 to 850 points, but those numbers can mean little on their own… except for the fact that the higher a credit score is, the more likely a borrower will be approved, and approved on preferred terms. However, credit scores become more meaningful and useful when they’re viewed within the context of a particular lender’s own cutoff points and underwriting guidelines.

What’s A Good FICO Score?

Under general mortgage lending guidelines, a score of 650 or above indicates a very good credit history. A score of 680 or better is usually viewed as excellent. People with these scores will usually find obtaining a mortgage quick and easy, and will have a good chance to get it on favorable, or what’s sometimes referred to as “preferred” terms.

Scores between 600 and 650 (average FICO scores fall into this range) indicate basically good credit, but also suggest to mortgage lenders that they might look at the potential borrower closer to assess any particular credit risks before extending a large loan or high credit limit. People with scores in this range have a good chance of obtaining a mortgage at a good rate, but may have to provide additional documentation and explanations to the lender before a large loan is approved. This means their loan closing may take longer, making their experience more like that of borrowers in the days before credit scoring, when every borrower was thoroughly researched as a unique individual.

A score below 620 may prevent a borrower from getting the best interest rates, but a good mortgage can still be obtained. In fact, in most cases, a borrower with a midscore FICO of just 580 can obtain a zero down, interest only mortgage… which has been, and continues to be, a very attractive and good loan for many mortgage borrowers.

Do something about bad credit.
If you’re hampered by credit scores in the mid 500s, you might give serious thought to stop fretting over what you can’t do because of bad credit, and focus on what you can do… and that’s improving or repairing your bad credit. In the long run, you’ll be far better off, and you’ll be glad you did. The laws which govern the credit reporting business make it possible to fix your own credit. A great Do-It-Yourself guide to raising your credit scores as quickly as possible is available by clicking here.

If you’re a hopeful, first-time home buyer who’s strapped for cash to the extent you don’t even have closing costs available, there is a solution to this major dilemna. At Mortgage Match, we work with several investors and lenders who offer zero down payment programs, and who also permit seller contributions toward closing costs… in some cases, up to 6% of the purchase price. There are also no reserve requirements which means you don’t need to have a lot of cash in the bank prior to your loan’s closing.

In order to take advantage of these types of programs, you need to locate a seller who’s willing to pay closing costs. Many sellers marketing their homes themsleves… without realtors… will make a point of mentioning this in newspaper advertisements and sales flyers. Additionally, some homes listed in your local MLS will denote this feature so that realtors can conduct searches based on this sales point.

Credit requirements or standards for these loan programs are not particularly high or hard to satisfy. If you’re able to document your income with paycheck stubs and/or W-2s, you only need a 580 midscore FICO. For borrowers who need to state their income, a 600 midscore FICO is all that’s required.

Mortgage Match also features 103% mortgage programs for borrowers with slightly better credit. The additional 3% on top of the 100% purchase price can then cover all or most of the mortgage’s closing costs. And, some of our 103% mortgage programs give borrowers more flexible monthly payment options. At any rate, both programs facilitate the purchase of homes when borrowers have only as little as $500 to $0 to work with for their home’s purchase.

And, if credit issues are keeping you from buying a home enlisting either one of these loan programs, it’s highly advisable that you take on some do-it-yourself (DIY) credit repair. Most people who use the PDQ Credit Repair Online Guide (click here), at only $9.95, see a 35-40 point increase in their FICO scores after only the first step. You can legally repair your credit. Raise your credit scores, and then get preapproved by clicking here.

With our 5 Year Fixed Choice Option ARM, a borrower’s monthly minimum payment option is fixed for up to 5 years based on an introductory rate as low as 2.99%*.

Option ARMs were created to give borrowers flexibility by:

–Managing their monthly cash flow.
–Providing multiple payment options, up to 3 options per month.
–Offering the same minimum payments for the first several years of the loan.
–Providing a low monthly payment that will result in less potential deferred interest on the mortgage loan.

All three other monthly payment options are available as long as they are greater than the minimum payment (Interest Only, 15-year amortized, and 30 or 40-year amortized depending on the loan term selected).

Available with the MTA index, the 5 Year Fixed Choice Option ARM is an option that includes all the other great features of our standard Choice Option ARM including:

–Up to 100% CLTV for owner occupied and 2nd homes (Full Doc & Stated Income).
–Purchase, Rate & Term and Cash Out (80/20 combo).
–40-year loan option available.
–Interest Only and HELOC 2nds available.

The 5-Year Fixed Choice Option ARM is available now through Mortgage Match.

* Rate may vary after introductory discount rate.

The 103% mortgage is available at Mortgage Match, and this particular version has some features that few other 103% mortgage programs offer.

For borrowers who have little cash and need some extra help to cover costs, it’s offered as a 103% stand-alone or an 80/23 combo. It permits up to 3% seller-paid closing costs, including pre-paids. And, an interest only option on the 80%, or first loan, is available to borrowers with a 680 or better midscore FICO.

This is for purchase mortgages. And, borrowers who can fully document (paycheck stubs, W-2s or tax returns for self-employed) their incomes only need a midscore FICO of 620 or better to qualify. For more information, just click here.

Mortgage Match is known for doing very diffcult mortgage loans. But sometimes, borrowers come along who have the types of credit issues which will prevent them from obtaining a mortgage loan from anyone, anywhere.

There are also those borrowers who can get approved for a mortgage, but again, because of credit issues, they can’t get approved on terms which they either like or feel comfortable with payment-wise. And further still, there are those borrowers who really need a zero down mortgage (with or without an interest only option) to be able to buy their own home. But once again, these disappointed buyers are prevented from obtaining this type of loan because of credit issues.

When prospective borrowers are in this predicament they can enlist the very legitimate option of “repairing” their credit. Credit repair is entirely real and completely possible. The Fair Credit Reporting Act (FCRA), which is federal law and governs the conduct and practices of the three major credit bureaus, provides every consumer with the explicit right to dispute the information being reported on their credit bureau files. And, disputing what’s on your credit report is every bit as legal as declaring “not guilty” in a court of law. It’s up to the credit bureaus to prove what they’re reporting. And herein, is where the average person can make the credit laws work in their favor, instead of against them.

For those who are just “sick and tired” of living with bad credit, and who want to do something about their credit issues, the Federal Trade Commission advises that do-it-yourself credit repair is perhaps the best way to go. There’s absolutely no need, or any advantage whatsoever in employing the services of a credit repair clinic or credit law firm… both of which can be very expensive… and very often no faster, or more effective than a do-it-yourselfer.

Acquiring the knowledge of the credit repair process, the “in’s and out’s” of dealing with the credit bureaus, and picking up and benefitting from the “inside” tips of those who “have been there and done it”, isn’t that hard. And, it shouldn’t ever be expensive.

PDQ Credit Repair offers an inexpensive (only $9.95), but thoroughly complete online guide to both repairing and improving one’s own credit. It covers everything you need to know to successfully raise your credit scores in a very simple, straightforward, step-by-step approach. It’s been helping borrowers all over the country turn their credit profiles around in the fastest time possible, and then qualify for the mortgage loan they really want and need. To learn more, and then get started in minutes if you choose, simply click here.