What Credit Score Do I Need to Buy a House?

If you’re in the market for a new home, it’s time to review your credit report. The information in your report helps your mortgage originator determine your creditworthiness (whether you’re likely to pay back money loaned to you).

Credit scores are offered by three major credit bureaus—Experian, TransUnion and Equifax—and can range from 350 to 850, depending on what your credit history looks like. Your creditors may report to all three bureaus or they may report to only one or two. To make sure they get a full picture of your credit history, your mortgage originator will pull from all three bureaus when performing a mortgage loan analysis.

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WHY IS YOUR CREDIT HISTORY IMPORTANT?

Your credit history is a record of your repayment of debts. Your credit report is a record of your history from several sources, including banks, credit card companies, collection agencies, and government debt (i.e. tax liens or judgments from court action, both federal and local).

Lenders, insurers, employers, and others may use your credit history to assess how you manage your financial responsibilities. Your history shows your ability to obtain credit and determines the terms of credit you may be granted, such as the interest rate you will pay.

WHAT IS A GOOD CREDIT SCORE TO BUY A HOUSE?

You will find a minimum score requirement for different mortgage programs. Most will work with scores as low as 640. If your score is right around the 640 mark, you will likely get a mortgage, but you may not get great rates or terms. The higher your score, the more favorable your rate, fees, and terms will be.

WHAT IF MY SCORE IS TOO LOW?

If you find that your scores are low, you aren’t out of luck. Fortunately, there are steps you can take to fix the problem:

How to quickly improve your credit score:

• Correct any errors on your credit report
• Pay all open collection accounts
• Pay all required payments on time
• Pay down and keep balances low on credit cards (half your credit limit is best)
• Don’t close unused credit cards as this may remove good payment history from the mix
• Open new credit only as needed

If you need help with these steps, you can work with your current lender or with a non-profit credit counseling agency to review our current credit file and put together a plan to improve your scores. This may mean paying off debt, paying bills on time, or taking out a credit builder loan.

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About Shari DeLatte

With over 30 years of experience in the banking/finance industry, Shari DeLatte is a mortgage originator who serves the mortgage needs of Vermont families in Chittenden, Franklin, Addison, and Grand Isle Counties. Shari grew up in Colchester, Vermont. She spends her free time antiquing, gardening, and playing cards with friends.

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