Tuesday, January 31, 2012

What kind of credit scores are needed for a Kentucky Mortgage in 2012

What kind of credit scores are needed for a Kentucky Mortgage in 2012?

How Is Your Credit Score Calculated?
Credit scores are calculated by plugging the data from your credit report into software that analyzes it and cranks out a number. The three major credit reporting agencies don’t necessarily use the same scoring software, so don’t be surprised if you discover that the credit scores they generate for you are slightly different.

Which parts of a credit history are most important?

Here is an approximate percentage value that each aspect of your credit report adds to a credit score calculation:

35% – Your Payment History
30% – Amounts You Owe
15% – Length of Your Credit History
10% – Types of Credit Used
10% – New Credit

Your Payment History Includes:
Number of accounts paid as agreed
Negative public records or collections
Delinquent accounts: 1)total number of past due items; 2)how long you’ve been past due; 3)how long it’s been since you had a past due payment
Amounts Owed:

How much you owe on accounts and the types of accounts with balances
How much of your revolving credit lines you’ve used — are you over-extended?
Amounts you owe on installment loan accounts vs. their original balances — are you paying them down consistently?
Number of zero balance accounts
Length of Credit History:

Total length of time tracked by your credit report
Length of time since accounts were opened
Time that’s passed since the last activity
The longer your good history, the better your scores (so keep your old accounts active)
New Credit:

Number of accounts you’ve recently opened and the proportion of new accounts to total accounts
Number of recent credit inquiries
The time that’s passed since recent inquiries or newly-opened accounts
If you’ve re-established a positive credit history after encountering payment problems
In general, checking to make sure you aren’t attempting to open numerous new accounts
Types of Credit Used:

Total number of accounts and types of accounts (installment, revolving, mortgage, etc.)
A mixture of account types usually generates better scores than reports with only numerous revolving accounts such as credit cards
Credit scoring software only considers items on your credit report. Lenders typically look at other factors that aren’t included in the report, such as income, employment history and the type of credit you are seeking.

What’s a “Good” Credit Score?
Credit scores (usually) range from 340 to 850. The higher your score, the less risk a lender believes you will be. As your score climbs, you are offered better (lower) interest rates.

Borrowers with a credit score over 760 are typically offered better interest rates and more financing options, but there are mortgage products available for nearly everyone.

The minimum credit scores needed now for an FHA, VA, USDA or KHC loan in Kentucky is 640.

Some lenders for a Conventional Fannie Mae or Freddie Mac loan in Kentucky will go down to a 620 score but you must have at least 20% down or 20% equity in your home.

Multiple Credit Scores
Your bank will pull credit reports and scores from all three major credit reporting agencies: Transunion, Equifax and Experian. They’ll probably use the middle score to work your loan application. Ask your lender to explain which credit scores will be used and how they affect your loan application.

To see if you qualify and have the right credti score to get a mortgage in Kentucky, fill-out my form below or call me at 502-905-3708 for a free credit analysis.

Fill out my form!