If you are interested in buying a house, first you will want to check your credit score.
So what is a good credit score and what’s a bad one?
In this article, we will discuss the minimum credit score(s) that you need for a few of the most popular mortgage types.
Credit Score Needed to Buy a Home
Typically, a score of 580 or better and a 3.5% down payment is needed to obtain an FHA loan. If you can afford a larger down payment of 10%, then often a lower score of somewhere between 500-579 is needed.
These are the table stakes for an FHA loan, which has the lowest credit score requirements compared to most other loan types.
These numbers vary from area to area and lender to lender, so if you need help determining what you need to qualify for a loan here in Vancouver, WA, give The Domench Team a call at (360) 524-2587.
Typical Minimum FICO scores by Mortgage Type:
- FHA Loan – 580+ credit score (caveat of 500-579 score is possible, but terms apply)
- Conventional Loan – 620+ credit score
- FHA 203K Loan – 620+ credit score
- VA Loan – 620+ credit score (sometimes as low as 580 depending on the lender)
- USDA Loan – 640+ credit score
Check your Scores for Free
You need to know if you will qualify for a loan, and there are a few good websites out there that can help you do that. We will always caution you when sharing your personal financial information online and invite you to call us at (360) 524-2587 for a free and confidential credit score check.
We also provide free credit counseling, which is an invaluable service that can help you to raise your FICO score by up to 70 points in a short time. We at The Domench Team at proud to offer services like this to those in our Vancouver, WA community!
These companies have apps that can alert you to changes on your credit score:
Lenders Look at More than just Credit Scores
With a purchase as large as a house, it’s important to understand how capable borrowers are of paying off their mortgage.
We look at the amount of debt carried by the potential borrowers to see if their debt burden will make it difficult to pay off all lenders. If you think you would like to start down the path toward homeownership, it’s a good idea to pay down credit cards and loans in your name.
A solid payment history on your credit cards and loans is also important. Don’t make late payments!
Compensating Factors for Bad Credit
- High Income
- Long employment history with current employer
- Low loan-to-value ratio
- Low debt-to-income ratio
- Large amount of money in savings
Credit Score Ranges
You receive a credit score from three separate credit reporting agencies. TransUnion, Equifax, and Experian. Each of them give you a rating between 350-850 – they are compiled together and averaged to give you your score.
Different creditors report to one of each of those agencies, so each agency will have a different score for you.
A credit score of 700 is widely accepted as good. Poor scores are usually considered anything below 620.
Credit Score Range
- 740+ = Great credit
- 680-739 = Average/Good credit
- 620-679 = Fair credit
- 580-619 = Poor credit
- 500-579 = Bad credit
Tips to Increase Your Credit Score Fast
If you are looking for a home in the Clark County, Washington area, the best way for you to increase your credit score quickly is to contact The Domench Team today at (360) 524-2587. We offer free credit counseling, which means that we can take a look at all of your credit specifics and give you actionable advice that will help you to raise your score in as little as a week!
Pay Down Your Credit Card Balances
If you are constantly running a balance on your credit cards, that can count against your credit score. The credit utilization ratio is the percentage of credit you are using on your card accounts. This ratio accounts for 30% of your credit score.
The higher the balance you have on your credit cars, the lower your credit score will be. Paying down these credit card balances as low as you can is an important first step to take before applying for a mortgage.
Become an Authorized User
Becoming an authorized user is a nifty trick that can help to lower your credit score through osmosis of sorts. If you have a family member or close friend with stellar credit, they can add you as an authorized user on their credit cards. You will inherit their entire credit history, the good and the bad if you are made an authorized user on their account.
FICO isn’t blind to this, and simply uses your authorized user status in their credit scoring algorithm, so this isn’t an instant fix. But this can net you a quick 30 points or so to your FICO score.
“Pay for Delete”
Collections on your credit report are bad and have a significant impact on your FICO score. You can call collection agencies directly and ask them if they will allow you to pay for a delete.
A pay for delete is an agreement wherein you agree to pay whatever balance you owe and the creditor agrees to remove the hit against your credit. If a creditor isn’t interested in doing this for you, there’s a good chance that your money will be better spent elsewhere to bump that credit score up.
If this sounds confusing, it can be. We here at The Domench Team are here to help you with all of your loan needs, and free credit counseling is a huge part of the reason why so many in our community trust and value us. Give us a call today at (360) 524-2587 and we will help you to raise your FICO score.
Q: How can I buy a house with a bad credit score?
A: It depends on how bad it is, where you want to buy a home, how much money you have in the bank, and the list goes on. In many cases, the answer is to raise that credit score, which is easier than you might think.
Q: Are FHA mortgages for first-time homebuyers only?
A: No. FHA mortgages are great for first-time homebuyers but as long as the loan is being used to finance a house that will be your primary residence, you probably qualify for one.
There is no limit on how many FHA loans you can get, but you can’t have two FHA loans out at the same time. This means that if you currently have an FHA mortgage, you need to sell that house before you can qualify for another FHA loan.
Q: What credit score do you need to purchase a home?
A: Largely, it depends. FHA loans require a 500 FICO score with at least 10% down and a 580 FICO score with 3.5% down.
Q: Do FHA loans only come with a fixed-rate mortgage?
FHA loans can be either fixed or adjustable. The most common mortgage for a FHA mortgages is a 15 or 30 year fixed rate
Q: How can I increase my credit score so I can get a home loan?
A: Pay the balances on your credit cards as low as you can afford to. Also, give The Domench Team a call at (360) 524-2587 and we will be happy to help you raise your score and get you into the home you’ve been dreaming about!