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Summary: A credit score is a key component that lenders assess when they decide whether or not to approve a mortgage applicant for a home loan. This article will explain what a good credit score is and what you can do to improve it if necessary.
As Childish Gambino sings, “We just want the money, money just for you.” This is America! It’s the land of money, of opportunity and homeownership……IF you have a good credit score. The question is, what is considered a good credit score? And how do you improve it if it needs a boost?
Your “score” is calculated by 3 separate credit reporting agencies, and tracked via your individual social security number. Any time you open an account, such as a cell phone contract, utility bill, credit card or loan, the creditor sends your account information to each and every credit bureau. Bureau reports are updated monthly, and they reflect your account balance, credit limit with each account, number of open lines of credit, and timely or delinquent payments.
Those factors, combined with your income, determine your “creditworthiness.” Creditworthiness, what every potential Seattle home buyer needs, is reflected as a number or credit score. The higher the credit score, the “better” your creditworthiness. This number, also known as FICO score, is based on a data analytics program developed in 1956 to measure consumer credit risk.
In a perfect world, the reports should be identical. However, the bureaus do not compare notes. The systems are not perfect, and should be monitored regularly. Any errors can be disputed. If you notice a discrepancy or error on a report, each bureau has an official method to dispute the errors. Disputes must be done in writing, and most can be done online. Do not despair, once an official dispute is filed, the bureau must respond within 30 days.
A credit score falls on a spectrum ranging between 300 and 850 with a good score being over 720. Most Seattle mortgage lenders require a minimum credit score of 620 as a major factor in their loan approval process and a 740 credit score to get the best rates on a conventional loan.
Scores over 760 can get you the lowest mortgage insurance premiums and best rates on most Jumbo Loans. The credit card companies and other companies’ minimum required score vary. Your credit score is not static. It can change from month to month, based on the aforementioned factors.
Any change to your credit report (increase or decrease) will take at least 30 days. Cleaning off inconsistencies and paying down higher balances well in advance of home shopping is to your benefit. The credit rating that you have is cumulative over your lifetime. Get your approval through our local Seattle online mortgage lender, Sammamish Mortgage. Follow our simple steps to secure yourself the opportunity to build a great credit score. Then you can achieve that American dream of home ownership. Then you can sing with Childish Gambino, “look at how I’m livin’ now!”
If you’re in need of a mortgage, Sammamish Mortgage can help. We are a local mortgage company serving the Pacific Northwest region including Washington, Idaho, Colorado, and Oregon. We have been providing several mortgage programs with flexible qualification criteria to borrowers since 1992. Please contact us if you have any questions or are ready to apply for a mortgage.
Since the process of getting approved for a mortgage is heavily dependent on credit history and that three-digit credit score that reflects reliability as a borrower, you should always put forth practices to keep that number healthy and growing.
Is your credit score holding you back from getting the best rate on your next mortgage? Here are a few easy and effective tips to help you get your credit score to where you want it to be.