Credit
Your credit is how you've been paying your credit obligations. A cell phone, pager or utility bill isn't a credit account unless you don't pay them and they become a collection, which will show on your credit. Credit accounts are usually mortgages, car loans, personal loans and credit cards.
Your Credit is made up of two parts; your actual credit history of how you've been paying and your credit score. Each of the three main credit bureaus give you a numbered credit rating or score. Credit scores are usually a good indicator of the strength of your credit. Typical credit scores range from the high 400's to the low 800's. The vast majority of people fall into the 500 to 700 range.
Here's a quick breakdown of scores:
< 500 -This is almost 100% of the time bad credit. Scores < 500 indicate
an abundance of derogatories. Its very hard to get a mortgage in this range, unless you have a lot of Cash and good employment.
500-550 -This is usually bad credit, but not always. This range can be tough
or easy depending on your Cash and employment. Cash is necessary and good employment can make all the difference.
550-580 -This is often good credit or very good credit with some recent derogs. The programs are usually similar to the previous range. Good Cash and employment can make this easy for a smart broker.
580-620 -This is usually good credit, often very good but limited credit. In this
range Cash and employment start becoming less of a factor. No
money down and no income programs start coming into play.
620-700 -This is usually very good credit. This range enables a smart broker to
give you options. No money down, no income or Cash and even no employment programs become possible.
700-800 -This is excellent credit. People in this range have worked hard to get
here. This range can get all the above with the advantage of very
low rates and easier approvals.
800 + - This is actually rare. This range doesn't offer any extra programs or
choices. It does come with bragging rights though. Congratulations.
A Word about Credit and Rates
Think of your Rate as the sum of your trade-offs. If you come to the table with excellent Credit, Cash and employment, then you are entitled to the lowest Rate currently offered. If you are lacking in only one of these areas, you should still get an extremely good rate. When you are lacking in more than one area, it gets harder to say what is a good rate and what's a so-so rate.
Rates are relative. They are relative to your particular situation and to the lowest rate currently offered. Recently, rates have been low, really low, the lowest in
probably 30-40 years. The lowest rates being offered have recently been in the mid 5's for a 30 year mortgage. In the last year they've been under 5%. It may be a long time before they are this low again.
Consequently, smart brokers have recently been able to offer rates in the 6's and 7's to customers that would have been lucky to get a rate in the 8's only a couple years ago. Within the last 3-4 years, the lowest rate being offered anywhere was in the low 7's. At that point, if you could offer a customer a rate of 7% or 6.875%, they would have been beating down your door.
Markets and Rates change on a daily basis. Your best strategy is to be informed. Make sure you have up to date content. Make sure your context is current also. Know what the current market is and where you fit into it.
