The Impact of Credit on Mortgages
Your credit score has a very high impact on most mortgages. Prior to taking out a mortgage, get educated on your credit.
If your credit is below 740 & you are not eligible for a VHDA loan, look at ways to boost your score, depending on which lender you are working with. In some cases, lenders offer their max credit to those with scores 720 and above, while other lenders offer their max rates to those with scores of 740 and above. Don't be satisfied with 700; look at ways to boost your score so that you can save thousands or tens of thousands of dollars, felt in the short term and long term. By increasing your credit score, you not only save money, but qualify for more.
If your credit is below 580, you usually won't be able to find a lender that will give you a mortgage until your credit rating is higher. I work with lenders that will go below 580, but you will need a larger downpayment if you go below 580, such as 10% or 20%. Some lenders have minimum scores of 620.
Credit score is not the only factor in qualifying for a mortgage. The current debts you may be paying, the down payment that you can afford (if applicable), the income that you have, and your sources of income are all factors. There are also other factors like government programs such as down payment assistance grants (like the 3% down payment assistance grant with VHDA going on at the time of this writing), special tax incentives like the current mortgage credit certificate of VHDA offering a tax cut of 20% of your interest paid yearly at the time of this writing, or interest rate reduction programs like the roughly 1% rates that some get with USDA direct loans in places like Smithfield, Gloucester, and parts of York and James City County.
Getting help to Build Your Credit:
Since joining Greg Garrett Realty, I have learned a ton about credit. I include some links to free credit building resources below, however for the best free help in building your credit, contact me so that either I can help you with building your credit if you're looking to buy a house, or I can refer you to a lender who can help you build your credit in preparation for a home purchase. For additional free resources, as well as some paid options, click this link.
If you want to start building your credit, it's helpful to know what your credit scores are. You don't need to pay for this service. You can contact each credit bureau for a free report each year. If you do it this way, it's best to spread out the requests, pulling from one credit bureau first (such as TransUnion), pulling from another credit bureau in 4 months (such as Equifax), and pulling from another credit bureau third (such as Experian). Don't worry about damaging your credit score when you are checking your own credit, as it is only a "soft pull" on your credit score. From this source you will find more accurate scores than any other outside the bureaus since Annual Credit Report pulls directly from the bureaus. You can do it all here.
To get scoring information & credit data more often, register on a paid website or free websites that tells you your scores for free:
Free credit score options:
Chase if you have the Chase Slate
Experian.com free account (the best Experian option, though every time you sign in they like to ask you if you want to "upgrade" though, which is a paid upgrade)
Wellsfargo.com (if you're an account holder)
Bank of America (if you're an account holder)
Barclays (if you're an account holder)
Discover (if you're an account holder)
Langley Federal (if account holder)
Navy Federal (if account holder)
Penfed (if account holder)
While the information can be good on the following sites, avoid paying much attention to the score on the following:
Capital One-Vantage Transunion
Chase - Vantage Experian (unless you have the Chase Slate)
Citi (Bankcard 900 max model)
Creditkarma - Vantage Equifax/Transunion
The FICO scoring model is used by around 90% of lenders. It will also give grades on the components of your credit score, and will include tips on how to fix each component.
If you'd prefer to do more than what you can do on your own, with help from me or lenders that can help your credit for free, let me know. I can refer you to a credit repair company that gives discounted rates to clients of Greg Garrett Realty.
Creditkarma.com (source of many photos on this page) will give you your Equifax and TransUnion Vantage ballpark score, which isn't very helpful since less than 10% of lenders use it, despite the Vantage dogma being perpetuated. I still use it in addition to Credit.com because it can sometimes give other insights for free that Credit.com will not. I do not like the recommendations on Creditkarma, since it looks like it's mostly from advertisers. I prefer building credit through Creditkarma.com over Credit.com and using Credit.com's FICO score. While it's not featured, you can actually check your FICO on Creditkarma.com here. To access some of the best aspects of Creditkarma beyond the home page, once you've signed up, check your credit reports here and credit factors here.
Below is an example Credit Factors Page:
While the top 3 categories in the above case are relatively accurate, I'd like to point out some CreditKarma problems with the bottom three.
Age of Credit History: Creditkarma only uses your active accounts. They do not factor in your closed accounts, which do factor into your credit report, depending on when they were closed. The person with the above credit has a few more years average age of credit history than the 3.1 listed. He discovered his actual average age, which included some closed accounts, using annualcreditreport.com. Mint.com also offers a more accurate average credit age, and is my recommended way of keeping track if you want to for free on a monthly basis.
Total Accounts: An almost negligible factor with the Vantage score, and not a factor with the more relevant FICO score.
Credit Inquiries: According to Credit.com & other sources, inquiries are on your report for 2 years, but only count negatively toward your credit for one year. In the case of this category, Credit.com gives a better indicator of your standing. See the same person's credit.com credit inquiry grade detailed here:
Rather than using Creditkarma to track your spending, I recommend Mint Bills. When using Mint Bills, I recommend not connecting your savings account to it, only checking accounts. This way, it's a one step rather than a 2 step approach to seeing what you owe with credit cards versus what you have in your checking accounts for this month's expenditures. Karma had too many missing expenditures that I didn't find with Mint (with some exceptions with my Chase Freedom card that had some issues, but they were clearly warned about and not random and undisclosed as in Creditkarma).
Credit cards will also sometimes give you your ballpark credit report, and in 2015, even more credit card companies are offering this for free.
I am on a few other sites as well, including Quizzle and otherwise, but find Credit.com, Creditkarma.com, and credit cards that I have that show my credit to be the most useful. I use Discover and Capital One to attain my TransUnion score, Citi for my Equifax, and Credit.com for my Experian scores.
Be aware that sometimes the tips on credit reporting websites, such as credit cards to get, etc., are sometimes paid for by advertisers on the site. This can include loans that they recommend, refinancing options, etc. Lots of other online sources have biased reviews paid for by advertisers with these same sorts of companies.
For some good tips on credit, look for multiple sources, especially unbiased ones. I post some of my own credit tips, including credit card suggestions, on my Facebook business page.
For ways to improve your credit score with credit cards, and to learn what to avoid, click on my page for it here. There you'll find statements I've made like the following:
While unpaid or late credit cards can have a negative impact on the home buying process by lowering someone's credit score, those unfamiliar with credit could also be negatively impacting their credit even if they always pay on time in full.
For more of what you need, click here to go to the Mortgage & Financial page, here for my Credit Cards page, & here for my "What do I Need to Buy a Home?" page. For a 62 page credit repair guide from Angle Financial, click here.
Click here for "Even More on Credit & Finances."
For free full reports to better understand the general score directly from FICO, click "Understanding Your FICO Score" or "FICO Score FAQS."
See my Credit playlist here
Note: The content on this site is not provided by a bank or issuer. Opinions expressed here are author's alone, not those of a bank or issuer, and have not been reviewed, approved or otherwise endorsed by a bank or issuer.