Required Minimum Credit Score For Home Loan

Sure, anyone can apply for a home loan despite one’s credit report and score or the individual’s monthly income. But what’s important is the kind of loan and the terms that the lender will give you. All this are influenced, if not entirely dependent on your credit score. There is no definite required minimum credit score for home loan since it varies from lender to lender but the average minimum is 660. A score lower than that will not exactly reject you of a loan but your terms and rates will be less favorable than those offered if you have a credit score of 660 and above. According to the Fair Isaac Corporation, to get the most favorable loan and rates, you have to have a score of at least 760.

What’s the difference?

To be exact, there is at least a 4% discrepancy between the interest rates given to individuals with a credit score of 760 and 580. If you do the math, that can come out to be a lump sum of money. That’s why it matters to have a good credit score when applying for a loan. A score between 660 and 759 can still garner you a loan with a fairly decent rate.

3 Home loan types

There are 3 types of loans; fixed-interest mortgage, adjustable-rate mortgage and interest-only loan. The fixed-interest mortgage is where the interest rate is the same all throughout the duration of the loan. A monthly amortization fee is also fixed. The most common duration of this type of loan is a 30-year period where the rates are at its lowest.

The opposite of the fixed-interest mortgage is the adjustable-rate mortgage where the interest rates change every year. Usually, the interest rate is fixed during the first few years and after a that time period, the total outstanding amount is amortized through the remainder of the loan.

Interest-only loans are loans where you can pay only the interest rates during the first few years. The borrower is not obliged to pay part of the principal amount in fear of getting an increase in the interest rates but paying an advance may decrease it. This type of loans works very similarly to the adjustable-rate mortgage.

Aside from credit score 

While the credit score can affect the loan and rates, there are a few others that the lender takes into consideration to assess the borrower.  The proof of monthly income and monthly expenses will prove how reliable your financial situation is and a record of your assets will prove you to be low risk. Sometimes, a lender will also require collateral of these assets or a consignee.

Get the best rates

The best way for you to get the best rates is to improve your credit report and score as much as you can. Request for a free copy and check for discrepancies. False information may drag your score down. If you have any existing loans or credit, pay it down or pay it off. These actions can significantly increase you credit sore.

Minimum Credit Score for Auto Loan Approval

So you need a new car but are uncertain about being approved for a loan because of your credit score. We know that there is a minimum credit score for auto loan approval. In order to get a good deal, you have to have a really good credit score. Sadly, not a lot of us have outstanding credit scores. In fact, the average American has an average credit score of 678 and according to the scoring system that is a marginal credit score. You have to have a score of 720 and above to be considered as having prime credit.

Minimum credit score for auto loan

Your credit score from the credit 

minimum credit score for auto loanreporting bureaus is used by lending companies to measure how much of a risk you are. Having a poor credit rating can raise a red flag that means you are more likely to miss payments. So if you have a poor credit score, more will be required of you such as a larger down payment or a higher interest rate.

What if I am rejected because of my credit score?

If you don’t know your credit score and have been rejected for an auto loan for credit-based reasons, you have the right to request a copy of the credit report and score, the very same copy that the company has used to base their decision. This is according to the FACT Act. Make full use of this opportunity to study your credit report and score. Check for misinformation or unusual activities.

Not yet

After having been rejected for auto loan, or any loan for that matter, do not immediately apply for another one. This can reflect badly on your credit report. After any rejection, wait a while, do what you can to improve your score before pursuing another loan.

This is due to the fact that when you apply for a loan, the lender will check your credit report and score. When they do, this will appear on your credit report. Every inquiry on your credit report is visible and when the record shows that you have had several inquiries, it may show desperation. It will give the impression that you are trying to get a loan but could not find one.

Improve your score

There are many ways to improve your credit score. None will take overnight, sadly. The fastest way to improve it is by paying down credit card accounts or other loans, if you have those. If you can, it is even best to pay it all off. With a credit card, the bigger amount you have used up in your credit limit, the lower your score will be so minimize your existing account to only 10% if you can. Check your credit report  for any inaccuracies and correct errors. A reported late payment (that you didn’t actually make), identity theft, a credit limit that appears lower than it actually is, unpaid accounts that have been settled can all affect your score. Remember that all these contribute to your score.