How bad is my credit really?
Your FICO score is the key. You should review your credit report from time to time to stay current on your score and to check for any inaccuracies that could lower your credit rating.
Different banks can use different guidelines to rate potential borrowers. However, the following are some general guidelines to give you an idea of where you stand:
A Quality Credit Rating. Generally, "A Credit" is considered a FICO score of 620 or above. These are credit reports with very few or no late payments and particularly, no mortgage late payments which are an immediate red flag to lenders.
A+ Credit Ratings which receive the best rates and terms generally require a score of greater than 750. A Credit Ratings generally fall between 680 and 750, and A- Credit Ratings are usually between 620 and 680. The difference in interest rate given to an A+ vs. an A borrower is usually minimal if anything, perhaps a quarter of a percent (at most) if a lender has a special program.
B Quality Credit Rating. These are generally borrowers with no recent or unpaid collections or charge-offs, but might have made a mortgage payment or two that were thirty days late (but not sixty). A B Quality Credit Rating is usually around 600. The credit rating takes a hit because of the late mortgage payment. If you're not reliable in paying your mortgage on time, lenders grow
concerned about whether you will be a reliable borrower.
The interest rate that B Credit Ratings receive might be 1-2% above those of A Credit Ratings, depending on the bank. In addition, supplemental credit documentation and letters of explanation may be requested before a decision is made.
C Quality Credit Rating. C Quality Credit Ratings generally will a number of late mortgage payments, some of which may be sixty days late, and/or debts going to collection, and perhaps even charged off as bad debt.
With C Quality credit, the credit history reflects enough risk that rates begin to dramatically increase, perhaps as much as 5% above the interest charged to A Quality Credit, depending on the lender. Mortgage professionals may divert these borrowers to alternate funding sources.
D Quality Credit Rating. D Quality credit reflects a recent bankruptcy or foreclosure, and generally will require a Sub-prime lender for credit. These loans are usually structured with a higher interest rate and short repayment term, and are probably the only credit that you will qualify for.
If you don't know what category you may be in, get a copy of your credit report and see what it says. If you're considering applying for a loan, it is important that your credit report be as accurate as possible, so be sure to dispute and correct whatever you can before you apply.
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