Credit Score Needed for a Mortgage

Q: How high a credit score do you need to have in order for lenders to approve you for a mortgage?

A: Most lenders use a credit score designed by Fair Isaac Corporation (FICO) in order to make their assessments of your credit risk. On the basic FICO scale, a score below 620 is generally considered sub-prime, 620 to 650 is good (although you may still be viewed as a higher risk candidate) and above 720 is seen as excellent credit. But there are no set numerical guarantees. The final decision on whether to give you a mortgage lies with the lender. And lenders consider other factors in addition to your credit score, such as your employment and salary, your savings and your debt-to-income ratio.

You may still get a mortgage with a score as low as 500. In fact, some lenders specialize in loans to borrowers with low scores. However, the lender will likely ask you to produce extra documents such as bank statements and W2s to support your application, and you may have to pay a higher interest rate. Also, Fannie Mae offers special Expanded Approval mortgages and Freddie Mac offers A-minus mortgages to those with lower credit scores.

While it’s wise to check your credit score regularly, it’s just as important to keep on top of your risk factors. These are the things that concern lenders -- such as having a delinquent bill payment record. Working to improve these points can make it easier to get a mortgage at a favorable rate. When you request a credit report from a credit agency, make sure you ask for both a credit score and a credit report. Most lenders can also provide you with a risk factor statement if you ask for one.

You should also be aware that not all lenders use the most widely accepted FICO scores to make their lending decisions. Some use scores from other agencies such as Scorex, and others use FICO scales that are customized to fit their own method of risk assessment. So it’s possible that different lenders may quote different scores when processing your application, even though they indicate the same creditworthiness.

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