Credit Score Archives - Page 8 of 16

Does Shopping Around for A Mortgage Pre-Approval Hurt Your Credit Rating? Smart homebuyers know that mortgage rates and terms can vary widely among lenders. While your credit score and history will influence what rates and terms you’re offered, there’s a wide range of flexibility, which means shopping around for a pre-approval makes sense. At the same time, it’s important to minimize credit inquiries to protect your credit rating.

What is Mortgage Pre-Approval?

Mortgage pre-approval is often mistaken for mortgage pre-qualification. Pre-qualification is a process whereby the borrower personally submits their financial information to the lender. Pre-approval is the process whereby the lender does their own vetting regarding the income, debt and credit of a potential borrower. Pre-approvals will involve a hard “hit” to the credit score, due to the inquiry.

Pre-Qualification Doesn’t Guarantee Pre-Approval

Note that just because you are pre-qualified for a certain amount, that doesn’t guarantee pre-approval. So it’s important to go ahead and get the official pre-approval before shopping for a home. This will make you a more attractive homebuyer to sellers.

Mortgage Hard Inquiries Make Credit Scores Dip

When lenders do a true pre-approval inquiry, it will make the credit score dip temporarily. This is an automatic process that happens because it looks like the person is looking to get more credit, which they are. Small drops from hard inquiries are temporary and will bounce back up in a short period of time.

Mortgage Inquiries Don’t Count

However, mortgage inquiries now don’t count on a credit rating, anymore. Lenders know that borrowers will be shopping around for the best rates and terms. As long as the inquiries take place in a short period of time, the inquiries will count only as one single hard inquiry, rather than multiple hard inquiries. In the event that multiple hard inquiries are noted on a credit report, as long as they are all from the same type of lender—a mortgage lender—it won’t count against the borrower.

The bottom line is that it’s wise to get multiple quotes when shopping for a mortgage. It’s more important to have a long-standing history of paying bills on time and managing credit well, than it is to worry about mortgage “hard inquiries.” Your real estate agent will help you to navigate getting multiple quotes in a short time span. Contact your agent to learn more.

What Is A High Enough Credit Score For A Mortgage? There are many people who are interested in purchasing a home for the first time. Even though many first-time homeowners are interested in the sticker price of a home, it is just as important to consider credit scores. Anyone who requires financing to purchase a home will have to go through a credit check. What credit score is considered high enough for a home loan? What do people have to do if they want to increase their credit scores?

What Credit Bureaus Do Lenders Use?

First, a credit score is a reflection of someone’s overall financial health. A lender wants to make sure someone has the ability to pay back a mortgage before they give that person a home loan. The higher someone’s credit score is, the more likely the lender believes he or she will have that loan repaid.

In general, there are three major credit bureaus. They include Experian, TransUnion, and Equifax. Most lenders are going to run something called a triple merge (or a trimerge) when they check someone’s credit. This means the lender is going to check someone’s credit score with all three major credit bureaus before deciding if someone should receive a home loan. All three major credit bureaus calculate credit scores using the Fair Isaac Corporation, or FICO, numbers, but they calculate credit scores slightly differently.

What Is Considered A Solid Credit Score?

Every lender has a slightly different metric, but a credit score less than 580 is considered poor. In contrast, a credit score over 800 is considered excellent. The maximum credit score someone can have is 850. If a loan is given to someone with a score under 620, this is considered a “subprime” loan. It is possible for people to qualify for a home loan with a low credit score, but they may be facing a higher interest rate.

Those who are interested in raising their credit score should pay all of their bills on time. It is also important for individuals to pay down as much of their debt as possible before applying for a home loan. This could help them increase their credit scores and get approved for a loan with a solid interest rate.

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