When I got into this business you needed good credit, three years on the job, ten percent down. It was pretty difficult to get a loan and banks had no way to judge who would get approved and who wouldn’t. They had basic standards by which to judge credit. Each company would approve you to their own standard.
Ten years ago, credit scoring had little to do with mortgage lending. Lenders reviewed the creditworthiness of a borrower or an underwriter would make approvals based on past payment history.
Things have sure changed over the years! Lenders studied the relationship between credit scores and mortgage delinquencies. There was a definite relationship. 1 out of 25 borrowers with credit scores below 550 had become 90 days delinquent at least once during their mortgage. On the other hand, only 1 out of every 1200 borrowers with credit scores above 780 became delinquent. Yes, a huge difference! So lenders began to take a closer look at credit scores and this is what they found out. The figures show the likelihood of a 90-day delinquency for a range of credit scores.
CREDIT SCORE ODDS OF A DELINQUENT ACCOUNT
595 25 TO 1
600 30 TO 1
615 50 TO 1
630 75 TO 1
645 100 TO 1
660 175 TO 1
680 250 TO 1
700 500 TO 1
780 1200 TO 1
So, if you were lending $300,000 whom would you lend it to? Credit scores range from 300 TO 850.