Acceptable Credit Score For Mortgages
April 17, 2009 by Admin
Filed under Articles, Credit Report, Credit Score
Property purchasers seeking for a mortgage must be aware that their credit score acts as an important factor in the home buying process in finalising the interest rate that lender will offer. It is complicated to understand the mechanism lenders determine our credit scores and more importantly, the consideration of acceptable credit scores for mortgages. The score a total that lenders utilise to estimate loan risk and past experience has proven that those with greater credit scores are less likely to default loaned payments.
Credit scores are not used in isolation. However, with the introduction of a new system where your credit report data is being integrated into a software program that includes additional lender specific factors (such as occupation history, income and the type of credit you are looking for), then a final number is shown. The three main credit reporting institutions do not always use the same scoring software programs, therefore it is very likely that other lenders will give slightly different scores.
What is acceptable credit score for mortgages?
The below percentages , on average , are what constitutes your credit score when lenders are determining your ability to pay back the loaned monies.
28 % – Previous loan commitment payment history
25 % – The total you owed.
23 % – How long have you held a credit history.
12 % – Previous categories credit applied for.
12 % – New applications applied for.
Credit scores usually ranged from 320 – 850 with the average of around 750. The higher your score, the lower risk a lender conceives you will have and as your score a increase, the interest offered by them will almost certainly decrease. Borrowers with a credit number higher than 700 are usually offered more financing choices and given better, reasonably competitive interest rates, but do not be disappointed if your scores are lower, considering that a mortgage product is there for almost anyone.
Any time you are in uncertainty, it is recommended that you ask your lender to explain to you how they worked out your credit score.
Michelle on Thu, 24th Sep 2009 2:27 pm
Thanks for the post. Consumers are in need of a clear-cut answer to the question “What should my credit score be if I want to buy a house?” There is information overload on the fact that you should have good credit, but not enough on what exactly that looks like.