What Credit Score Is Needed for a Mortgage?

Are you planning to take out a mortgage? Check your FICO score first. Consumers with lower totals pay higher interest if their applications are approved at all. In this article, we will look at typical requirements from creditors in 2021 and ways to raise the score.

Generally, the total ranges between 300 and 850 points. For your application to be accepted, the lender’s criteria must be met. Different institutions set different thresholds for borrowers. On average, when your result falls below 720, conditions deteriorate. Using the best credit repair services is the fastest way to increase the FICO score. But how high should it be?

What Is the Best Score?

You do not have to achieve the best result (850). Your chances also depend on the type of loan you apply for. The ones insured by the government have less rigorous criteria. For example, you may qualify for an FHA loan with only 500, provided you make a 10% down payment. A score of 580 brings it down to 3.5%. In comparison, a conventional loan requires at least 620.

How to Check the Score

Every American citizen is entitled to a copy of their report from each of the major bureaus. Once a year, you may get this document for free from Equifax, Experian, and TransUnion. Involving all three is crucial, as a lender may only share data with one agency.

Head to www.annualcreditreport.com and download the files. Alternatively, call the toll-free number or send a written request. In 2021, due to the pandemic, citizens may get a free copy monthly.

Your score depends on the contents of your reports. You may also find it through special applications like Credit Karma. Different lenders use different formulas to evaluate your total. However, you may always assess your chances by looking at the official FICO status.

A Huge Difference

The lower the score — the more expensive the loan. Borrowers with imperfect records end up spending thousands of dollars more in interest payments. Raising the total is essential.

Check the score long before submitting your loan application. If you need repair, this will take several months. Negative items cannot vanish overnight. Whether you handle the disputes by yourself or hire professionals, plan ahead.

How to Raise the Total

If the score is too low, you need to fix or rebuild it. In the first case, you dispute and erase false derogatories on the reports. If all entries are accurate, the only way to improve the odds is through diligent repayment of new loans. Repair takes months, but rebuilding could span years.

Scrutinize your records — there could be more than one mistake. Information from any of the agencies may be flawed due to duplicates, outdated items, and events that never happened like evictions, repossessions, tax liens, etc. Consumers who consolidate debts may discover false late payments. Any such details may be disproved and wiped off for good.

There are two ways to do this. First, you may repair your credit score on your own — collect and examine the reports, pinpoint the errors, and dispute them. However, a few borrowers have the time, knowledge, and patience necessary to negotiate with creditors and bureaus.

Professional credit repair is a popular choice, as you may delegate all the tasks to seasoned experts. The team will gather your data, scrutinize it, find inaccuracies and collect information to disprove them. It will liaise with lenders, bureaus, and collection agencies to resolve your problems.

How Long Does It Take?

This depends on the level of complexity. The more negative items you want to dispute — the more evidence there is to collect and the more letters there are to send. Most repair firms limit the number of disputes per month unless you sign up for their premium services. Aside from the disputes, they also send cease and desist letters to collectors (so they stop calling you) and goodwill letters to creditors (so they remove negative entries voluntarily).

The Bottom Line

Without a positive score, it is impossible to get the best conditions on a mortgage, let alone qualify for it. Check your status long before applying. Remember that the criteria depend on the lender and the type of loan. Repair or rebuild your history to get the lowest interest rate.