Credit Score Needed to Buy a House
The credit score needed to buy a home tends to fluctuate with the health of the general economy. Prospective mortgage borrowers need a credit score of at least 660 to buy a house when the economy is healthy. To get the best mortgage loan in a credit crunch a credit score of 750 is required. Prospective home-buyers must also keep their credit card balances between 20 to 35 percent of their available credit limit for the best credit score and subsequent mortgage loan terms.
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The Average Credit Score
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There are three major credit-reporting agencies, Equifax, Experian and Trans Union that provide credit reports and credit scores. When mortgage lenders consider prospective home-buyers for a mortgage loan, loan officers generally evaluate two of the three available credit scores for a composite or an average credit score. A prospective lender may also select the middle credit score disregarding the first credit reporting source and the third.
FICO Credit Score
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Credit scores are also referred to as a FICO score. FICO is a method of scoring or calculating credit scores. FICO is an acronym for the company that designed the model for calculating credit scores, "Fair Isaac Corporation".
The three major credit-reporting agencies also provide a version of a FICO score, Equifax, Experian and Trans Union. Equifax refers to their scoring method as the "Beacon" score. -
The Best Interest Rate
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There is a significant difference between the credit score needed to buy a house and getting the best mortgage loan terms. The lower the credit scores the higher the interest rate on the mortgage loan. In addition to a credit score of at least 660 prospective mortgage borrowers must also have an acceptable debt-to-income ratio.
The amount of the mortgage loan compared to the prospective home-buyer's income is also a significant factor for being considered for a mortgage loan with a lower interest rate.
A Better Credit Score
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The best way to get a better credit score is to understand the credit report and what the credit score means. AnnualCredit.com is the best place to request a free credit report.
A consumer can improve his credit score by making credit card payments on time, paying off credit cards to reduce the credit-to-income ratio and making sure to identify and correct any inaccurate information on his credit report. Correcting inaccurate information on a credit report can be accomplished by writing a letter to the credit-reporting agency disputing the entry.
What Consumers Need To Know
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A credit score high enough to buy a house is contingent upon conscious and diligent personal financial management. Every consumer should review her credit report from the three credit reporting agencies annually. Consumers should always know what their credit score is and how it is affected.
Consumers who have be the victim of identity theft should monitor and protect all bank accounts and credit card accounts for activity on a quarterly basis
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