Bad Credit Mortgage Loans – How Does Your Fico Credit Score Affect Your Loan Approval? by CL Haehl
How “bad” is bad credit? If you can pull your credit report yourself and get a copy of your FICO credit score, that will give you a good idea. Here is a general idea of the FICO score breakdown:
500 – 580 – Poor Credit – You should be able to get a home mortgage loan if you are willing to make a down payment, probably somewhere between 5-20%. You will probably need a sub-prime mortgage loan with a slightly higher interest rate.
580 – 620 – Fair Credit – You’re right on the edge. You may be able to get 100% financing or you may need a small down payment to make the loan work. Depending on how much money you put down, you may be able to get prime interest rate.
620 – 640 Average Credit -You should get a 100% home loan financing. You should not need to have a down payment. You should be able to get a low interest rate.
640 – 700 Good Credit – You should be able to be approved for a 100 – 125% home mortgage loan. You should be able to get a great interest rate.
700+ Excellent Credit – You’re in the drivers seat! You should be able to get an excellent rate with excellent terms. Of course, all of these factors vary with each borrower depending on the size of loan you want and on your income and other factors.
What is the FICO Score Based On? Most of the FICO score is dependent on amounts owed and payment history. So, the fastest and best way to increase your credit score will be to make payments on time and keep old accounts open.
What Should I Avoid To Keep My Score High? If you are in the process of getting a new mortgage loan, avoid applying for or opening any new credit accounts. This can drop your credit score very quickly and make it that much harder to get approved.