Nowadays, having a good credit score is really important. This determines your ability to get a mortgage, insurance, etc. Credit score is a number that determines your creditworthiness and your ability to repay your credit in the given period of time. This also determines the interest rate on your mortgage, auto loans, etc. Read on to know the ideal credit score to get a mortgage and how to increase your score if required.
Required credit score to get a mortgage
Credit scores range from 300-850. If you have a credit score of 700, it’s considered to be a good credit score and if it’s less than 585, it’ll be difficult to take out a loan. If you want to apply for a conventional loan, your credit score should be around 700-720. But if you have less than 700, you can apply for Federal Housing Administration (FHA) loans. You need to have a minimum score of 580 to take out an FHA loan. If you’re applying for Veteran Administration (VA) loans, the credit score has to be around 600-620.
The 3 major credit bureaus usually use the Fair Isaac Corporation (FICO) score model to calculate your credit score. The FICO score uses different credit data in your credit report such as, your payment history, amount you owe, types of credit used, etc. to determine your credit score.
If you don’t have the required credit score to get a mortgage that is a conventional home loan, then you can apply for FHA and VA loans.
FHA and VA loans – Eligibility criteria
There are a few eligibility criteria you have to fulfill in order to take out an FHA loan. You should have a Social Security Number and should be a citizen of United States. In that case you have to show evidence of your Green Card information. You should also be able to provide with 2 years of history of credit and other assets including your income. In case you’re not a permanent resident of USA, you should be the primary resident only and should be able to provide with the documents.
For VA loans, as the name suggests, it is available only for veterans. You should have a Certificate of Eligibility before applying for a VA loan. You should have served actively in the Army, Navy, Air Force, etc continuously for 24 months. The veteran should not have been discharged under any dishonorable activity.
Tips to increase your credit score
If your credit score isn’t enough to qualify for either FHA loans or VA loans, you should try to improve your score before applying for a mortgage. Check out the following tips to increase your credit score:
1. Pay off your bills on time and if you’re having trouble to do it, go for a free credit counseling session. You can also negotiate with your creditors for eliminating your extra payments.
2. If you open new accounts, do so if needed and not otherwise.
3. Try not to make large purchases and buy things which are only necessary.
Apart from above, charge your cards as less as possible and try to clear the outstanding balances at the end of every billing cycle.
Related Resources :
Salt lake city mortgage – If you’re a Salt Lake City resident, you should check out saltlakecity-mortgage.com for more information on mortgage & refinance.
property insurance – Stride Limited are commercial property brokers who buy to let properties and blocks of flats insurance – the property prices available online. Wide range of business insurance plans for new companies, start-up companies, contractors and freelancers.
Mortgages – Provides information about mortgages, mortgage rates, home refinancing, home equity loans and many other mortgage related topics.