Credit scoring places you in one of three general categories.

• If you have a score of 680 or above, you may be considered an A+ borrower. Your loan will involve basic underwriting, probably through a computerized automated underwriting system and could be completed within minutes. If you are in this category, you have a good chance of obtaining a low interest rate and closing your loan quickly.
• If you have a score below 680 but above 620, an underwriter will probably take a closer look at your file to determine potential risks. If you are in this category, you may find the process and underwriting time no different than in the past. Supplemental credit documentation and letters of explanation may be required before an underwriting decision is made. You may still be able to obtain "A" pricing, but loan closing may take longer than if you had a higher score.
• If you have a score below 620, you may not be eligible for the best loan rates and terms offered. Mortgage professionals may divert you to alternate funding sources other than Fannie Mae or Freddie Mac. You may find loan terms and conditions less attractive than “A” loans, and it may take some time before a suitable funding source is located.

If you do have negative information on your credit report, such as late payments, bankruptcy, or too many inquiries, your best strategy may be to pay your bills and wait. Time is often your best ally in improving credit.

The length of time to rebuild your score depends on the reason behind your low score. Most decreases in scores are due to the addition of a new element to your credit report such as a delinquency or an inquiry. These new elements will continue to affect your score until they reach a certain age. Delinquencies remain on your credit report for seven years. Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens remain for 15 years. Inquiries remain on your report for two years.

While many lenders use these scores to help them make lending decisions, each lender has its own strategy, including the level of risk it will accept for a certain loan product. There is no single “cutoff score" used by all lenders and there are many other factors used to determine your eligibility and interest rate.

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