What is a good credit score to buy a house?
Posted by @TopMortgageRate
Let’s start with some general “rules” regarding credit scores and mortgage loans. Most lenders prefer to see a score of 620 or higher, when considering applicants for a home loan. This is not a hard and fast rule. It’s just a commonly used minimum standard within the mortgage industry.
Why do they often draw the line here? In a word, statistics. Statistical analysis shows us that people with lower credit scores have a higher risk of mortgage default. A default occurs when the borrower stops making the monthly payments, for whatever reason. The lower the score, the higher the risk. This is how lenders and creditors see it.
What is a Credit Score?There are several different credit-scoring models in use today. In this article, we will focus our attention on the FICO credit score in particular. It’s the one most commonly used by mortgage lenders. The FICO range goes from 300 to 850. Again, higher is better. A credit score of 620 or higher is typically what’s needed to buy a house with a mortgage loan. But there are exceptions to that rule. The 620 credit score will come up again later, by the way, when we discuss the new rules for FHA loans.
Your score is based on the information compiled within your credit reports. You have three of these reports, because there are three reporting companies in the United States. They are TransUnion, Equifax and Experian. Each of these companies collects data from lenders and creditors as to how their customers repay their debts.
For instance, when you make payments toward a credit card or personal loan, that payment history gets reported to the three credit-reporting companies. If you make all of your payments on time, you will likely end up with a good score. If you miss payments, and the creditor(s) report those delinquencies to the reporting companies, you’ll end up with a lower score.
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