Does Your Credit Score Really Matter?

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Filed under: Credit Issues

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Today’s topic is all about credit. When you are getting a mortgage, it’s common to wonder if a credit score really matters? The answer: absolutely yes!

Credit is the one thing that will make the biggest difference in your rate, program, and approval. Income, employment, and down payment are all factors that influence your offer. But the credit score is one of the most critical parts.

Generally speaking: the higher your credit, the better rate you will get.

Credit Watch Programs vs. Mortgage Industry

So many people are tracking their scores on credit watch programs, such as Credit Karma. These programs are fantastic and I think everyone should be using them because they give you a sense of the overall trend in your credit score. Additionally, you get an alert when changes happen.

But keep in mind: for the credit score they give you, the algorithms are likely different than the scores that we use in the mortgage industry. Our scores typically pull lower than most other scores.

Where Does Your Credit Score Need to Be?

For conventional, FHA, and VA loans, if you have anything over 740, then it’s “overkill” for getting a mortgage. You’ve hit the pinnacle – anything over that won’t help. If we are talking about jumbo loans, you will see improvements for scores over 800. The credit score plays a large part in these bigger loans.

Recently, I had a client with a credit score of 790 and we pre-approved them a few months ago. Then, we re-pulled the score and the new score was over 800, and it improved their rate.

Anything in the 700’s will be considered a nice credit score. In the mid- to upper-600’s is the average range. Below that point is where things get difficult for mortgage approvals. But we can work with scores down to 580 and even lower in a few circumstances.

Watch Your Credit if You Want to Buy a House

Yes, credit is something you should work on if you are thinking about buying a house. Good credit is obviously important. But, even for people who don’t have great credit, there are still programs out there. But it will cost you more because of the highest interest rate.

This can be a complicated topic – feel free to reach out to me any time if you have questions.

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