A. What Do The Numbers Mean?
Credit Scores are a critical part of the loan process. Banks are very interested in how well you pay your bills and credit scores reflect this information. They are by no means a perfect barometer, but they are important when it comes to loan eligibility and the overall cost of a loan.

If you have paid all of your bills on time, for a long period of time, you can expect that your scores will exceed 700 points (out of 850) and could possibly be higher. However, any score over 680 will qualify you for a conventional mortgage loan and offer the best interest rates. However, unless your score is over 760 points, there could be an extra fee charged by the lender. The fee charged will not only vary depending on your credit score, but also on the amount your are going to put down on your home purchase, or the amount of equity you have in your home at the time of your refinance. A 680 score will have a hgher fee than a 700 score and a 700 score will have a higher fee than a 720 score, etc.

If your score is between 620 and 680 you can still get a mortgage loan, but your options will be limited and in most cases you will have to work with the FHA government loan program. FHA is not a credit score driven program, but an income driven program, which means that if you can show that you can pay for your loan, your credit score will not be a factor as far a eligibility is concerned. ,

B. Late Payment Penalties
If you have some late payments on a mortgage or a car payment you might find that your score has moved below 620. A score under 620 points usually means that you will no longer be eligible for a mortgage loan. Under some circumstances, through FHA, some loans are accepted when a borrower has between 580 and 620, but they are rare.

C. Liens and Bankruptcies
Liens and a bankruptcy will have the most adverse effect on your credit score. If you have a collection or a lien and it is not satisfied your scores will probably be in the 500's or low 600's.

If you completed a bankruptcy, and it is over 2 years old, loans are available through FHA. Each year that a bankruptcy seasons will positively affect your credit score until 7 years have lapsed, at which time the bankruptcy will not be a detriment to your credit score or interest rate.

This also applies to liens. Once liens are satisfied it will take time for your credit score to improve until they no longer affect the score. This time frame, however, is shorter than for bankruptcies.

D. Improving your Credit Score

Fortunately, modern technology has helped many borrowers improve their scores in as little as one weeks time. Oftentimes, through the help of a poweful computer program, offered by credit reporting agency companies, a loan officer can recommend the changes necessary to move their score higher by as much as 10 to 20 points. This could be the difference between paying a 1% lender fee, or a 2% lender fee, and when your loan amount is $300,000 this can be the difference between paying the lender $3,000 or $6,000 in extra fees.

So often these days, a borrower's credit score is lowered simply because they have "maxed out" a credit card or two. Oftentimes if they have the means to pay down their credit card debt to below 50% of the available credit on that card, or better yet below 35% of the available credit, their score can jump significantly.

This task is especially important when a borrower has a 718 credit score and if they were to successfully move their score to over 720 points, they could pay far less in lender fees and even improve their overall interest rate. The same hold true for a 698 score that wants to move over 700, etc. The threshold points in the mortgage industry are: 680, 700. 720, 740 and over 760.

At any point that a borrwer is a few points short of any of these marks, a loan officer will usualy advise that corrective measures be taken. Fortunately, before the borrower has to pay any fee for this "rapid rescore", the loan specialist can find out beforehand if it is even possible to move the score higher, and if it is possible, they can find out exactly just how much each credit card needs to be paid down in order to acheive the desired goal.

Sometimes it will only require one card to be paid down and at other times several cards. Each client will have a unique circumstance that will require expert advice in order to get the benefits of a higher credit score through the "rapid rescore" process.

At First Priority Financial upgrading the credit score is one of our specialties and to see a borrower pay thousands of dollars less in fees because of our work, is a very satifying experience for both ourselves and our clients.