Your credit score is a number that represents your credit-worthiness. Having a low score can prevent you from getting approved for a mortgage and will often be accompanied by HIGH interest rates. Having a high score will allow you to not only get approved but get a low interest rate as well. This will save you more in the long-term. When it comes to real estate and mortgages, you might be wondering what “good” credit looks like. Credit scores vary when it comes to applying for a mortgage vs car loan vs a credit card. Let’s take a closer look into that.
What is ‘Good’ Credit in Real Estate?
When it comes to real estate, most experts would agree that if your FICO score is at least 740, you’ll be eligible for the best interest rates that are offered at the time. However, for every 20 points your credit score comes in below 740, you’re likely to have a higher interest rate and may not qualify you for many programs. Let’s say you have a 740 credit score and you lock in a 4.125 percent interest rate on your mortgage loan. If your score came in at 700, your rate might be 4.5 percent, at 660 it might be 5 percent and so on.
A low credit score may result in either very high interest rates or in a complete denial for your mortgage application. Experts say that somewhere between 600–620 and lower becomes the gray area where it gets harder for you to get approved for a mortgage loan.
One thing to take note of is that all mortgage lenders are not created equally when it comes to getting approved or denied and what your interest rate may be. For instance, some lenders may be more flexible with low credit scores than others. It’s always good to shop around for lenders that can work with you to better assist your needs.
Poor Real Estate Credit?
If you’re in the 600–620 gray area and are either unsure of whether your mortgage application will be approved or if you can afford a higher interest rate don’t worry not all hope is lost! You may be the perfect candidate to work with a credit repair company. Here are some tips and suggestions in doing so:
- Make sure you pay all of your bills on time. This is one of the largest weighed factors in determining your credit score.
- Pay down that debt! Concentrate on paying down high-interest debt.
- Check your credit report yearly. You can check your credit report once a year at no cost to ensure that it is error-free. (It’s estimated 79% of credit reports have errors on them.)
- Ensure that your debts owed is at or less than 30 percent of your total credit allotment.
- Be sure to only take out new lines of credit when absolutely necessary.