Do you have the credit score you need to buy a home? Take a look below for more information on what credit score you need to get a mortgage, and some helpful information on raising your credit score.
What Credit Score Do I Need?
You’ll need a credit score of at least 640 to get a mortgage for your home. However, keep in mind that the higher your credit score is, the more likely you are to qualify for the mortgage and interest rates that you want.
Why Your Credit Score is So Important
Lenders estimate your ability to pay back money borrowed based upon your credit score. A high credit score can result in a lower interest rate and save you thousands of dollars in interest paid over the life of the loan.
The Five Factors of Your Credit Score
Payment History – 35%
How you’ve paid your bills in the past. A long history of making payments on time and not missing payments can have the most positive impact on your credit score.
Outstanding Credit Card Balances – 30%
The amount you owe relative to the total amount of credit available. People with the best credit scores tend to keep their balances low.
Length of Credit History – 15%
The age of your open credit lines – the longer your credit history, the better.
Type of Credit – 10%
Your current mix of credit cards, retail accounts, finance company loans and mortgage loans – a diverse mix of credit is best.
Inquiries – 10%
How many credit applications you’re filling out. Multiple credit report inquiries can lower your score.
Raising Your Credit Score
The best score to have is 720 or above - you are viewed as a safe risk and typically will receive a loan with a lower interest rate. If your score is below 720, you may want to try to raise it.
Making payments on time, lowering your credit card balances, keeping older accounts open, and using discretion when applying for new credit will all help to increase your score.