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Your credit score plays a key role in your ability to secure a mortgage. But what credit score do you need? And what is the average credit score among residents of Washington State?
According to the latest Customer Credit Review report by Experian, one of the three credit reporting companies in the U.S., the average credit score among residents in Washington State is 735. But you might be able to qualify for a mortgage loan with a score well below that level.
The Experian report mentioned above covered the VantageScore, in particular. This consumer credit-scoring model was jointly created by the three major reporting bureaus that operate in the U.S. (Equifax, Experian, and TransUnion).
Washington State consumers are somewhere around the upper-middle of the list of states covered in the review, with a respectable 735. That’s up slightly from 716 from the year before.
In previous blog posts, we’ve explained the relationship between credit scores and mortgage loans. Here’s a quick recap.
These scores are three-digit numbers based on information found within a person’s credit reports. The reports themselves are essentially a record of your previous financial activity, particularly your use of credit cards and loans. The information is maintained by the three companies mentioned above — Experian, TransUnion and Equifax.
You can think of your credit score as a “grade” based on how you’ve borrowed and repaid money in the past. Consumers who have a habit of making timely payments on their debts tend to end up with higher scores than those who routinely miss payments. Similarly, consumers with a relatively low credit utilization ratio tend to score higher than those who “max out” their credit lines.
Generally speaking, a higher credit score will put you in a better position to qualify for a mortgage loan in Washington. It’s one of the factors banks and lenders use when reviewing loan applicants. A higher score might also help you qualify for a lower interest rate, which in turn could save you money over the long term.
According to the report mentioned above, the average credit score among Washington State residents is 735. While this average figure might be useful for comparison purposes, it doesn’t necessarily draw the line between mortgage loan approval and denial.
In fact, it’s possible to qualify for a home loan in Washington with a credit score that is considerably lower than the average of 735.
The FHA loan program, for example, only requires a score of 580 for borrowers who wish to take advantage of the 3.5% down payment option. And the credit requirements used by Freddie Mac and Fannie Mae for conventional mortgage loans have eased over the last few years, as well.
Generally speaking, a credit score of between 620 to 650 should be sufficient enough to help you qualify for a home loan, as long as all other aspects of your financial life Are in good standing. That said, every lender will have their own specific minimum credit score requirements, so you will need to get that exact information directly from them when you apply for a mortgage.
So a home buyer with a below-average credit score shouldn’t automatically assume that a mortgage loan is out of reach. Today’s mortgage industry is actually more flexible than in previous years, with a broader range of products and programs. Additionally, there are often other “compensating factors” that can make up for a shaky credit score.
It’s also important to realize that consumers with low credit scores are not powerless. There are certain proactive steps you can take to improve your numbers. One of the most important things is to make sure that you pay all of your bills on time going forward. Your “payment history” (as its known) is the most important factor when it comes to credit-scoring models. It weighs more than any other factor.
In addition, you’ll also want to make sure that you do not max out your credit cards. Spending close to your credit limit every month may be bad for your credit score. And if you’re planning on applying for a mortgage some time soon, then you will want to make sure that you do not apply for a number of other loans within a short period of time. This can put a strain on your credit score.
Instead, be diligent about your bill payments and make sure they are made in full and on time every month to help keep your credit score in good standing.
If you have questions about mortgages, we’ve got answers. Sammamish Mortgage has been helping home buyers and homeowners across Washington State since 1992. We offer a variety of mortgage programs to borrowers across Washington State, Oregon, Idaho, and Colorado. Many of our programs have flexible criteria for credit scores and other factors. Please contact us with any financing questions you have.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.