Ask Dr. Don
By Don Taylor, Ph.D., CFA • Bankrate.com
Bankruptcy
Dear Dr. Don,
If you have a bankruptcy on your credit report, is it possible
to get financing for a new home?
Hopeful Homebuyer
Dear Hopeful,
It's not impossible, but lenders aren't going to beat a path
to your door. The Mortgage.com Web site will walk you
through a three-step approach to determining if you qualify for
a mortgage loan.
Also, the American Bankruptcy Institute has
a Consumer's
Corner that has some interesting features for people with questions
about the ins and outs of bankruptcy.
Finally, check out "What
if I get turned down?" from Bankrate.com's Mortgage Basics and
"Your credit:
The basics."
Beacon Scores
Dear Dr. Don,
What is a perfect beacon score? What is a fair score? How do
the scores range? Is 700 to 800 a great score?
Lit Lighthouse
Dear Lit,
The three major credit bureaus -- Equifax,
Trans
Union and Experian
-- each have proprietary credit scoring models developed in conjunction
with Fair,
Isaac & Co. (FICO). Equifax names its model's results
"beacon scores." Lenders want to assess the probability that a borrower
will repay the loan. Credit scoring models attempt to predict that
behavior.
Beacon scores can range from 300 points to 900
points but typically are between 500 points to 800 points. Most
mortgage lenders will approve an applicant with a score of more
than 640 points. Lenders will charge higher interest rates to borrowers
with lower beacon scores because of the higher probability of default.
Scores of more than 700 are great scores.
Bankrate.com writers base their answers on our editorial
content and advice of financial professionals. We make no claims
or representations about the accuracy, timeliness or completeness
of such content, advice or the answers provided to you. Our content,
advice and answers are intended only to assist you with your financial
decisions. However, by its nature such information is broad in scope.
Your financial situation is unique, and our content, advice and
answers may not be appropriate for your situation. Accordingly,
we recommend that you get different opinions and seek the advice
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final decisions or implementing any financial or investment strategy.
-- Posted: Oct. 13, 1999
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