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RISMEDIA, March 2009-(MCT)-“Good” credit is not a black-and-white matter these days. To mortgage financiers Fannie Mae and Freddie Mac, there’s good credit, better credit and best credit.

That’s because about a year ago Fannie and Freddie added grades of risk to people’s credit scores, which means they will add fees to the mortgages they buy in the secondary market, in order to mark them clearly for perceived risk. Those risk grades can make a loan significantly more expensive.

A score higher than 740 gets the best rates, according to Rich Bira, branch manager of FCM Direct Lender in Chicago.

“A score between 720 and 739 gets .125 percent added to the rate, a score between 700 and 719 gets .375 percent added to the rate, and a score between 680 and 699 gets .5 percent added to the rate,” he said.

Bira said he recently counseled a couple who had a combined 691 credit score, which pushed up the price of their loan, even though in many ways they would be considered “good” borrowers.

The clients had paid their bills on time, but their score was dragged down somewhat because they don’t have a long credit history and because they didn’t have multiple lines of credit.

“You have to keep in mind that in order to have high credit scores, you have to show that you have credit available to you and that you use it wisely,” Bira told them.

So, even though the clients had nominally qualified for a 5 percent loan at that time, because of the fees, they’d have an additional .5 percent added to their rate, making their loan too pricey.

He advised them on how to raise their scores in the coming months and to hope the rates will still be low when their scores improve.

© 2009, Chicago Tribune.
Distributed by McClatchy-Tribune Information Services.