A credit score is based on a person’s credit history, which includes information such as how much credit they have, how much of it they’re using, how long they’ve had credit, and whether they’ve made payments on time. Factors such as credit card usage, loans, and other types of credit are taken into account when determining a credit score. Generally, the more responsible a person is with credit, the higher their credit score will be.
Why do you need at least 600 credit score for mortgage loan approval?
A credit score of 600 or above is generally considered to be a minimum requirement for a mortgage loan because it is considered to be the threshold for “fair credit.” A fair credit score indicates that the borrower has a history of making payments on time and managing their debt responsibly.
Lenders use credit scores as a way to assess the risk of lending money to a borrower. A higher credit score indicates that a borrower is less risky, and therefore more likely to be approved for a loan and at a lower interest rate. Borrowers with lower credit scores may be considered to be a higher risk and may be required to pay higher interest rates or may be denied a loan altogether.
In simple terms, a credit score is a number that tells the lender how likely you are to pay back the loan. A higher credit score means that you have a good credit history and it’s more likely that you’ll get approved for a loan and at a better interest rate.
Check your credit score through the following channels:
- Credit reporting agencies: The three main credit reporting agencies in the United States are Experian, Equifax, and TransUnion. The report will not include your credit score, but it will provide information on the credit accounts and loans that are affecting your score.
- Banks and credit card issuers: Some banks and credit card issuers offer free credit score access to their customers. You can check with your bank or credit card issuer to see if this is an option for you.
- Online credit score providers: There are several online providers that offer credit scores, such as Credit Karma, Credit Sesame, and Quizzle. These services may require you to sign up for an account and may offer a limited number of free credit scores per year.
This is a supplementary post to: First-Time Homebuyer’s Guide to Mortgage Approval