@Duke-of-Earl wrote:
Good grief, then why do they report them? Every time I turn a new corner in this business, I discover a new irrationality. Sorry, not your fault, but I'm really beginning to despise this foul system.
740-760 gets you the best refi rates.
Remember there are different types of credit. Where a 720 on mortgage is well qualified, many types of unsecured debt won't approve at 720. A mortgage is a secured loan, and therefore presents less risk to the lender than unsecured (if LTV is good). When you default on a CC, they have very little to go after without filing suit, etc and then looking for non-exempt income or assets. But on a home or property, they have the asset to fall back on.
Plus, most people will stop paying CC's long before they will stop paying their mortgage, ESPECIALLY if they have equity. And that is the reason for the LTV....to make sure the borrower has enough skin in the game, that they will work hard to make sure they don't jeopardize it. If it was a no-down or very low down loan, then borrowers tend to be less interested in saving, since they have no real equity ownership.
FICO is a general tool for lenders to use to determine risk. But lenders all are willing to assume more or less risk depending on the type of loan, size of loan and other credit factors. FICO just gets your foot in the door (the coupon rate as you called it), but then LTV, DTI and actual credit references seal the deal.
Good luck.
@Anonymous wrote:
740-760 gets you the best refi rates.
Remember there are different types of credit. Where a 720 on mortgage is well qualified, many types of unsecured debt won't approve at 720. A mortgage is a secured loan, and therefore presents less risk to the lender than unsecured (if LTV is good). When you default on a CC, they have very little to go after without filing suit, etc and then looking for non-exempt income or assets. But on a home or property, they have the asset to fall back on.
Plus, most people will stop paying CC's long before they will stop paying their mortgage, ESPECIALLY if they have equity. And that is the reason for the LTV....to make sure the borrower has enough skin in the game, that they will work hard to make sure they don't jeopardize it. If it was a no-down or very low down loan, then borrowers tend to be less interested in saving, since they have no real equity ownership.
FICO is a general tool for lenders to use to determine risk. But lenders all are willing to assume more or less risk depending on the type of loan, size of loan and other credit factors. FICO just gets your foot in the door (the coupon rate as you called it), but then LTV, DTI and actual credit references seal the deal.
Thanks, txjohn, for putting this into the broader context. All points well taken. In a way, though, your overview of the mortgage lender's point of view puts a finger on why I felt a need to maximize my score. The refi I'm interested in, with >~ 100K cash-out, is a bit out of the ordinary, so I thought I might need a better score to counteract that. But I guess the LTV (which I think is OK at about 70%) should take care of that anyway.
Just want to check, though: When you say "740-760 gets you the best refi rates", I trust you mean something like "the best rates are already available at ...". Right? If not, I'd even be willing (but reluctant) to bring my score down to that range, if that was what it took. But it would be a hard target to hit correctly, and I would mainly resent the delay it would involve.
Starting Score: EQ 804 - (April 2009)