Buying real estate is a process that includes many different steps and could possibly take a while. One part of the real estate buying process is having your credit score checked. Lenders will check your credit score to make sure that you are safe to loan money to. Understanding your credit score can help you with this one part of your mortgage requirements.
Each credit reporting agency lists your credit history as supplied to them by the individual lenders and includes governmental records. Each report assigns a credit score number to you. The credit scores reflect your theoretical risk of default to the lending institutions. When you buy real estate, lenders check your credit score with all three credit bureau reports.
You have three credit scores, often called FICO scores, one from each credit bureau. The lender takes the middle score as your baseline. Lenders have different standards, but generally a “C” score is around 500 to 600, a “B” is around 600 to 680, and an “A-” is above 680. Over 700 is the magical number that gets you the attention you desire. If your score is under 500, find someone to privately finance your loan or a partner with good credit while you work on improving your score.
The following scores each tell lenders what kind of credit you have, and whether or not they should give you a loan:
720 – 800 Awesome. You can basically get whatever loan you want.
700 – 719 Wonderful. You can get top rates and terms.
680 – 699 Good. You can get good rates and terms.
660 – 679 Okay. You will pay higher costs and rates.
640 – 659 So-so. Okay score if you have a good income.
620 – 639 Weak. You need a good income and some money.
600 – 619 Poor. Use a creative loan broker and pay more loan costs.
580 – 599 Bad. Almost impossible to get a loan without a large down payment.
Under 580 Work on fixing your credit without delay.
The scoring model does NOT compute:
Age & gender
Race
Whether you rent a home or own
Length of time at your current address
Job or length of employment at your job
Income
Education
Marital status
Whether or not you’ve been turned down for credit.