So your borrower has a less than perfect credit score?
This doesn’t have to mean that their application is doomed. Private lenders know that the algorithms used to produce credit scores are closely guarded secrets. And they sometimes provide vastly different credit scores based on similar types of information.
However, there are two things that we know for sure:
- The basic structure of the credit report
- That there’s more to a credit report than just the score
In general, the algorithm weighs the information to produce a score as follows:
- 35% Payment History: Is it a perfect repayment history or is it spotty with missed and late payments.
- 30% Utilization: What percentage of the available credit is being used? Less is better.
- 15% Credit History: How many years of active credit history are available.
- 10% Type of Credit: A variety of credit types will reflect positively on a Score.
- 10% Inquiries: Frequent credit inquires can reflect negatively on a Score.
Thankfully, as a private lender, we look beyond the credit score and directly examine the payment history for each credit line. Good and reasonable explanations for payment histories are more important than a credit score alone.
If your borrower’s credit score is lower than expected, the underwriters at Kokanee Mortgage can provide common sense solutions to help get the job done.