Using Credit


Friend Bank Credit Factors

1. Credit scores do affect your loan request approval.
a. Have you looked at your credit /credit score within the past two months?
b. What was that score?
c. Was your score 660 or greater? (Usually a minimum score of 660 is required to obtain a mortgage approval.)

2. Credit scores affect your interest rate and your down payment requirement.
a. The higher your credit score the better your interest rate will be.
b. The higher your credit score the less requirement of a down payment. (Any percentage less than 20% down will result in private mortgage insurance. Your banker will explain more details.)
c. Typically the middle credit score of the three reporting agencies will be used to determine the lending factors.
d. The three reporting agencies are Experian, TransUnion and Equifax. You are entitled to free credit report annually. www.annualcreditreport.com
e. If there are two applicants then the lower of the two middle credit scores will be used to determine the lending factors.

3. There are five factors that determine our credit scores. They are:
a. The amount we owe: This compares how much we owe to the total amount of the credit limit on our credit card and loans. If you have a low balance then this represent you use credit wisely.
b. Payment history: This is a track record of how timely we have made our payments. If we have been timely in making our payments then we are most likely to be responsible to pay our mortgage payments in the future.
c. Length of credit history: The age of your oldest credit account. The average age of all your credit accounts and the last date of use of your credit account. Having an old credit account without use usually shows responsible established credit history.
d. New credit and new inquiries: Every time we apply for or open a credit account an inquiry is created. This does affect our credit scores. We should limit these events.
e. Types of credit in use: The number of credit cards, the number of installment loans and the number of mortgage loans we owe all affect our credit score.

Equal Housing Lendor. Member FDIC. © Copyright 2008 Friend Bank. (334) 886-2367   .