At some point or another, most people have some problems with their credit scores. There are myriad reasons why it could happen; you don’t have to actually declare bankruptcy for your credit score to slip: late payments, medical bills, divorce, even credit report errors can all give you problems.
And, as everybody knows, a good-to-excellent credit score is a critical part of getting the financing you need for the home of your dreams. So what can you do?
Let’s look at what goes into your credit score. A number of factors go into the compilation of your score, factors that include:
- Your credit usage (how do you use credit? Are your credit cards maxed out? Do you have a lot of credit cards?)
- Your credit history (have you always paid on time? What kind of arrangements have you made to repay loans?)
- Your credit over time (is this the first time you’ve had problems, or is this an ongoing thing?)
There are three major credit scoring bureaus, and creditors report to them every three months.
In terms of the numbers, your credit score will show up as a number from 300 (low) to 850 (high). As a general rule of thumb, the higher your score is, the lower interest rate you’ll be able to get, because lenders will see you as a good risk—in other words, they believe that you will in fact repay your loan in a timely manner. On the other hand, there are lenders who are willing to take a chance on people with lower scores; but they’ll charge you for it.
So what does all this mean for getting a mortgage? Anything under a score of 620 is low for mortgage purposes. The first and best thing that you can do is improve your credit score. This doesn’t happen overnight, but it can happen over time, so if you can wait, that’s your best route.
If you can’t wait, though, many federally backed mortgage loan programs (VA loans, USDA loans, and FHA loans) don’t have exact minimum credit score requirements, so there may be more flexibility there. If you have a credit score of 580 or more, you can probably qualify for one of the federal streamlined programs. If your credit score is below 580, and you’re bringing some other positive things to the table—good income, savings, etc.—then you still may be able to find a program that works. Just don’t expect to get the lowest interest rates!
At Avrus Financial and Mortgage, we’ve been helping match people up with the best possible mortgage financing for their specific situations, even those with less-than-perfect credit scores. We’ve helped them, and we can help you.
Why not ask us how… today?
