About Credit Scores

All lenders look at your credit history and credit score to determine your eligibility for a given loan program. Not all credit scores will qualify for all programs and not all credit scores that qualify for a particular program will qualify for the same interest rates and terms. Lending is done on a "risk" basis and the lower your credit score, the more risk you represent to the lender.

What is "FICO"?
FICO is the generic name for your credit score. It is actually the proprietary name of one of the three credit bureaus scoring system, but has become synonymous with the term credit score (much the way the word Xerox is used for any photocopier). Your credit score, or your FICO, is typically a score between 850 and 400, with the higher being better.

There are three credit bureaus that all lenders use: Equifax, Experian, and Transunion. Almost all lenders work the same way, they pull a "tri-merge" credit report to obtain all three of your scores. If you are married, there would be three for you and three for your spouse. Almost all lenders then use the middle of the three as your score. Not the highest score and not the average of the three - just whichever score of the three is in the middle. If you are married, the same would be done with your spouse's scores. Once you have one score and your spouse has one score, the lower of the two becomes your application's score.

You may have a situation where your three scores are 710, 698, 677 and your spouse may have 760, 695, 680. Your score is 698 and your spouse's is 695. Therefore your application's score is 695.

Most lenders consider a 620 score as minimally acceptable. Not all loan programs will allow scores as low as 620. Some have 660 or 680 or even 700+ requirements.

Most of the construction loan programs we offer require at least a 620 score, although some we offer have minimums as high as 700. Lot loans require at least a 680 score.

We have some construction loan programs available for scores as low as 540, but you must be prepared to have a larger than normal down payment (or equity in your land) and will pay higher rates and fees as compared to those programs for better credit.

If you have had late payments on your mortgage or rent in the last 24 months, you may not qualify for some programs even if your scores otherwise would qualify. Mortgage lenders take your housing payment history very seriously, as should you.

Basic tips for raising scores

• Never pay your mortgage late.
• Pay down credit card balances. The largest single factor in your score is the amount of debt you have vs. the available credit. If you are over 50% of the available credit on a card, your scores are suffering. To get a quick bump back up in scores, get those balances paid down to under 50% and preferably under 30% of the available limit. Paying all the way to a zero balance is not necessary.
• Pay off any bad debts. Most lenders will require you to pay any unpaid collection accounts or charge offs.
• Lastly, pay things on time, don't try to wait until the last minute hoping you made the creditor's grace period.

Common Mistakes That Influence Credit Scores

There are many obvious factors that will lower your scores. But, sometimes people do things that they think will have a positive effect on their credit scores, when they are actually doing the opposite. The following are just a few things that will lower your scores.

• Having unnecessary credit inquiries
• Using lenders that do not report your credit accurately
• Maxing out credit limits
• Closing credit accounts
• Paying with cash and never using credit
• Transferring credit card balances to continually seek lower rates
• Paying off installment loans early
• Not increasing credit limits when offered

Once you understand your credit score, you can start preparing to do an application for loan approval.

Start with Requesting More Information in order to speak with a representative.