What is the score or credit score?
The credit score or “score” indicates how likely it is that you honor or default on your financial commitments. The higher the score, the lower the risk that a potential customer will default on their payment obligation.
It is important to know your credit score to monitor what level it is at and know in advance if you need to improve it and identify what may be affecting it.
What are the differences between credit score and credit history?
The credit history is the record of all the financings that you have had during a certain period, together with their status and payment behavior. While the score is a calculation that a credit bureau makes, based on the credit history, to determine a number, within a certain scale, that represents the probability that the user honors or defaults on their financial commitments.
If you want to know what credit score is necessary for you to take the step to request a mortgage, you cannot miss this post where I tell you everything.
What is the necessary credit score?
Based on data from Ellie Mae’s latest “Origination Perception Report,” the average FICO® Score for loans that were paid off in February reached 753.
Due to the recent relaxation of lending standards, many people are concerned about whether their credit score is strong enough to qualify for a mortgage.
While the stricter lending standards can pose challenges for some people, many buyers may be surprised by the options that are still available to borrowers with lower credit scores.
There have been improvements in recent years
In recent years, the average credit score of Americans has improved, which is a good sign of financial health.
As someone’s score improves, they move toward a stronger financial future.
As more and more creditworthy Americans enter the housing market. There has been a natural increase in the distribution of FICO completed loan scores.
If your credit score is below 750, it is easy to see. This data and worry that you are not eligible for a mortgage.
However, this is not always the case. Although most borrowers currently have scores above 750, mortgage qualifications aren’t just credit scores.
There are also options that allow people with lower credit scores to buy a dream home.
When you ask yourself what your score is, you have to keep valuable information in mind.
Here’s what Experian, the world leader in consumer and corporate credit reporting, had to say:
- Federal Housing Administration Loans: If paid down 3.5%, homebuyers can achieve an FHA score of 580 or higher.
- although a 10% down payment can be made with a low minimum like 500
- Likewise, conventional loans are a more popular type of loan that has a score of at least 620.
- USDA Department of Agriculture loans. Typically lenders need a minimum credit score of 640 to achieve USDA although it can go up to 580
- Loans from the Department of Veterans Affairs. This type of loan needs from 580 to 620 points.
There is no doubt that a higher score will give you more options and better loan terms, especially with loan terms as poor as they are today.
When planning to buy a home, discuss with experts what steps can be taken to improve your credit score. Which is critical to getting you in the best position. However, don’t rule out that your score is not perfect; today’s market is still full of opportunities.
Don’t let any assumptions be made about. Whether your score is strong enough to end your homeownership goals prematurely.
Contact your realtor so you can have better information.
So if you already know what the credit score you need for yourself is. Don’t forget to check with your realtor.