In 2020, we had more than our fair share of surprises which included seeing historically low interest rates in the mortgage industry. News like that may have you wondering if you’ll be able to qualify for a mortgage with your current credit score, especially if you’re hopeful of getting a low rate. Unfortunately, many home buyers are unaware of their current scores while others feel they have to have a higher score than what they do. So this would be a good time to learn more about this subject and decide what your next move is going to be.
How The Credit Reporting Agencies Calculate Your Score
You can make the credit agencies very happy by making your bill payments on time. While on-time bill payments have an impact of 35% on your credit score, there are 4 additional factors that play a significant role in determining it including:
Balance-to-limit ratio – this is based on your credit account balances compared to your available credit lines (30% impact)
Credit history – how long your credit accounts have been open (15% impact)
New credit inquiries – happens whenever you apply for a new credit account and doesn’t include “soft” inquiries* (10% impact)
Types of credit accounts currently open (10% impact)
(* whenever you check your own credit score, or a credit card company or lender checks it for pre-approval purposes, this is known as a soft inquiry and doesn’t impact your credit score)
Review Your current Credit Report
Before starting your search for a home, it’s always a good idea to download copies of your credit reports from Equifax, Experian, and TransUnion so you can check for errors. If you find any, you can have them corrected by filing a request to do so online. Keep in mind that these reports don’t include your FICO score. However, you can acquire that for a fee. On the other hand, some banks and credit card companies provide this as a service to their members.
Our goal is to help more individuals become homeowners. Consequently, there is a broad range of home loan options available including conventional, FHA, USDA, and VA loans. The minimum credit score for a conventional loan is 620. Although the USDA and VA have no minimum credit score requirements, most banks and mortgage lenders set their own requirements for eligibility. You’ll need a credit score of 580 if you want to qualify for a 3.5% down payment with the FHA.
For more information, call Front Range Mortgage today in Colorado at (719) 540-2020. If you need assistance in making a decision on the best mortgage, allow our experts to step in and help you. Call today to schedule an appointment!