The lending industry uses categories to asses the credit risk of any particular borrower. If the property checks out and you have sufficient income, flawless credit and the required down payment you are considered as having "excellent" credit. Someone with "excellent" credit can walk into almost any lender and get a mortgage loan at a better rate then someone with "poor" credit.

Lenders will typically place applicants into the following credit categories:

Excellent (Credit score higher than 680) - if you have:

          ◊ No 30-day late mortgage payments in the last 2 years

          ◊ No 30-day late payments on consumer debt in the last 1 year

          ◊ No charge offs, judgments, repossessions in the past 2 years

          ◊ No bankruptcies, foreclosures in the past 4 years

Good (Credit score between 650 and 679) - if you have:

          ◊ No 30-day late mortgage payments in the last 1 year

          ◊ Less than (3) 30-day lates on consumer debt in the last 1 year

          ◊ No charge offs, judgments, repossessions in the past 1 year

          ◊ No bankruptcies, foreclosures in the past 4 years

Fair (Credit score between 620 and 659) - if you have:

          ◊ Less than (1) 30-day late mortgage payment in the last 1 year

          ◊ Less than (3) 30-day lates on consumer debt in the last 1 year

          ◊ Less than (1) judgment or repossessions in the past 1 year

          ◊ No bankruptcies, foreclosures in the past 3 years

Poor (Credit score less than 620) - if you have:

          ◊ More than (1) 30-day late mortgage payment in the last 1 year

          ◊ More than (3) 30-day lates on consumer debt in the last 1 year

          ◊ Numerous judgments or repossessions in the past 1 year

          ◊ No Bankruptcies or foreclosures within the past 2 years

The above are general industry guidelines to make lending judgments on the borrower's loan application. There are no hard-and-fast rules of separating the borrower on the border line between one credit category and another. Also, there are compromising variations between one lender to the next depending on the degree of subjectivity involved in underwriting and how much each lender wants to commit their funds.

It is important to review your credit reports regularly in order to minimize the occurrence of errors and inconsistencies.