Post Series: Credit & Debt

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Credit can be a vexing topic for even the most financially savvy consumers. Most people understand that good credit history can improve your chances of qualifying for a loan because it shows the lender you’re likely to repay it.

However, understanding the meaning of your score, how it’s calculated, how it can influence your mortgage eligibility – and the interest rates you pay – is not as easy as it sounds. Below, we break down all of these topics.

Explaining Your Credit Score

The FICO credit score (created by the Fair Isaac Corporation) is one of the most common scores used by lenders to determine your credit worthiness. It’s a component of pricing for the interest rates and fees you’ll pay to get your mortgage.

While exact scoring models may vary by lender, some variation of the standard FICO score is often used as a base. FICO takes different variables on your credit report, such as those listed below, from the three major credit bureaus (Equifax, Experian and TransUnion) to compile your score. Those range from 300 – 850. From this information, they compile a score based on the following factors:

  • Payment history (35%)
  • Amount owed (30%)
  • Length of credit history (15%)
  • Types of credit (10%)
  • New credit (10%)

Payment History

Roughly 35% of your credit score is based on your history of timely payments on your debt. If you’ve made your payments on time and in full in the past, there’s a good chance you’ll do the same in the future, so your credit score may be higher. If you’ve had tax liens, late payments, lawsuits or bankruptcies, they can result in a lower credit score.

Amount Owed

Roughly 30% of your score is based on the amount of money you owe. Higher balances tend to lower your credit score, while lower balances can positively impact it.

Length of Credit History

About 15% of your score is calculated on the length of your credit history. Typically, the longer you’ve had open credit accounts, the higher your score can be.

Lacking credit history may not hurt you when it comes to FHA and VA loans, but good credit history is essential when applying for a conventional loan.

Types of Credit

Types of credit determine about 10% of your credit score. This refers to the variety of types on your report, including installment debt like credit cards and retailer cards as well as revolving debt like student loans, auto loans or mortgages. Having a mix of installment and revolving debt can help prove you can handle different types of payments.

New Credit

About 10% of your score is determined by new lines of credit. Opening multiple lines of new credit too quickly can negatively impact your credit score, as it may look like you’re desperate for credit. Asking for multiple lines of credit and receiving multiple credit inquiries also has the potential to hurt your score, even if you don’t end up opening new accounts.

Note that there are two types of credit inquiries – one for lending purposes and one for educational reasons. Inquiries for lending purposes may ding your credit score by a few points. However, getting your credit pulled by a company like QLCredit, which shows you your report and score for educational purposes, won’t impact your score.

If you’re shopping around for the best rate or loan terms, don’t worry. Multiple credit inquiries over a short period of time for the same type of loan will be grouped together as one inquiry, so your score won’t be as heavily influenced.

What is the Average Credit Score in the U.S.?

So how does your credit score stack up against others? The average credit score in the United States was 699 in April 2016, according to Experian’s seventh annual State of Credit report. This is a record-high for Americans.

What Credit Score is Needed to Buy a House?

You may be wondering what credit score you need to buy a house. Unfortunately, you may not find an exact answer. There are several factors that go into qualifying for a mortgage besides your credit score. This includes the type of loan you’re applying for as well as your income and debt levels. Because of this, there isn’t an exact number you need to qualify. Some guidelines, however, are listed below:

  • Conventional Mortgage: 620
  • FHA Mortgage: 580
  • Veteran Affairs (VA) Mortgage: While the VA does not have a minimum credit score requirement, Quicken Loans requires a 620 credit score on all VA loans

It’s not only the minimums that matter. A higher credit score will generally qualify you for a lower rate on your mortgage, saving you money.

Conventional Mortgages

Conventional mortgages are home loans that follow the standards set by Fannie Mae and Freddie Mac. They’re uninsured by the government and known for lower down payments and good interest rates. These are typically best for those with good or excellent credit, as these loans require a higher credit score than an FHA loan.

These loans tend to offer the most competitive interest rates and flexible repayment periods, such as 15- and 30-year mortgage terms. While you may pay more money up front, you can save more money over the course of a conventional loan than you would with an FHA loan.

Minimum Credit Score for Conventional Loans

At Quicken Loans, your credit score for a conventional loan must be 620 or higher. Various lenders have different requirements and may require a different score.

FHA Loans

Backed by the Federal Housing Administration, FHA loans are insured by the government, making them easier to qualify for than conventional loans. They offer down payments as low as 3.5% and low-equity refinances, which allow you to refinance up to 97.75% of your home’s value.

FHA loans can benefit borrowers with lower credit scores or those who spend a significant portion of their income on housing. Current homeowners who are underwater on their mortgage – and could lower their monthly payment by refinancing – may also benefit from an FHA loan.

Minimum Credit Score for FHA Loans

The minimum FICO score for an FHA loan through Quicken Loans is 580, with a 3.5% minimum down payment. Other lenders may have different requirements.

For a standard FHA loan, a minimum of one credit score is required to qualify. If your lender obtains all three of your credit scores, they’ll use the middle score for consideration. If you apply for a mortgage with your spouse, lenders will use the lower of the two middle credit scores.

Better Credit Scores Lead to Greater Odds of Getting Approved

It’s important to know your credit score and understand what impacts it before you begin the mortgage process. Once you understand this information, you can begin to positively impact your credit score or maintain it so you can give yourself the best chance of qualifying for a mortgage.

It is possible to qualify for a mortgage with a relatively lower credit score but with high income and low levels of debt. It’s also possible to be turned down for a mortgage if your score is relatively higher, but you have high levels of debt and a lower income. Credit score requirements should be used as a guideline, as debt levels, income and down payments will also be taken into consideration when determining your mortgage eligibility.

Are you ready to start the mortgage process? Contact a Home Loan Expert to get started!

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This Post Has 96 Comments

  1. Had an unfortunate bump in the road last several months; however, never late on mortgage payment; on time every month since home purchased in May 2012. You guys can turn me down but we’re still in a buyers market and can’t blame you for your sole purpose and ONLY objective. Make money with no complications or a customer who does not meet all of the checked boxes. You are selfish because if you can’t get everything you want; you won’t give the customer equal consideration. It’s okay; not hurting; not desperate, and ya’ll need us more than we need you. Just think; if we had the same values you have you wouldn’t make a red cent. Top of the afternoon to you!

    1. I’m very sorry to hear you had a poor experience with us. We do work with clients all the time to try and get them when they need to be in order for us to be able to help them with a mortgage. If you would like to email us more information at Amanda@quickenloans.com, we can take a look at your situation and see if we might have an option to help you. Thanks!

  2. Hi I am trying to see if I can afford buying a decent home between 175K and 225K in next 6 months. Currently as it stands my Credit score is 563. I still have a debt of $7000 and no late payments of my current credit accounts and no balances on them. How often does the credit scores are updated at TransUnion? what are my options if I am looking to buy i.e. go for FHO or Conventional loan or apply at QuickenLoans?

    1. Hi Amrit:

      We offer both FHA and conventional loans. With that being said, the minimum credit score for FHA is 580 and the minimum credit score adding conventional loan is 620. You’re close enough that you may be able to raise your credit score by doing some simple things. I’m going to recommend you check your credit score and report through our friends at QLCredit. You’ll be able to get personalized tips on where you can improve for free without affecting your score. I’m also going to recommend you speak with one of our Home Loan Experts they may be able to work with you to come up with a personalized plan. You can get in touch with them by calling (888) 980-6716.

      Thanks,
      Kevin Graham

  3. my wife & I would like to buy a larger home, our present home is through Bank Of America, my wife had 3 heart attacks in January 2016 and we were late on I house payment and 3 other installment accounts during those 2 months. our credit scores are Jerry Coleman 685 and Carol Colemans is 659, before the heart attacks both were over 750. Bank Of America said they could not help us for another year when those late payments were over 2 years old, our combined income is over $200,000 per year. the home were looking at is $549,000, we can put 20% down, do you think you could get us qualified?

    1. Hi Jerry:

      I’m going to recommend you speak with one of our Home Loan Experts. They can look into your situation thoroughly. It may also come down to how late you were. You can get in touch with us at (888) 980-6716.

      Thanks,
      Kevin Graham

  4. My daughter and I are looking to buy our first home my credit score is in the mid 578 her’s 640. We are in nned of some assistance in how to go about getting a loan based on just my score or would it be best to combine scores?

    1. Hi Martha:

      In order for you both to be on the loan, you both need a credit score of at least 580. As it stands right now, your daughter can get a loan on her own if all other qualifying factors checked out.

      If you want to be able to use your income, we would need to get credit score up a little bit. To that end, I’m going to recommend three things. This blog post has a lot of great tips on how to improve your score. You can also check out our friends at QLCredit in order to get a copy of your credit report and score for free. You also get tips on how to improve your credit. Finally, I’m going to recommend you talk to one of our Home Loan Experts. They may be able to set you up on a path to improve your credit. You can get in touch with us at (888) 980-6716.

      Hope this helps,
      Kevin Graham

  5. How am I to build my credit back up if no one gives me a chance…it is 530 and you would think that I could get a mortage because if I didnt pay you would be getting a house in which I am not intending on loosing.

    1. Hi Lynn:

      I absolutely understand your frustration. Unfortunately, you have to have a credit score of at least 580 in order to get a loan with us. Mortgage investors have very strict guidelines. In addition, we want to make sure we put you in the best possible financial position to succeed. That said, there are absolutely ways to build your credit up.

      I’m going to recommend you start with the tips in this blog post on rebuilding your credit. After that, we do have a service in QLCreditwhere you can pull your credit report and score for free. It will also give you tips on how to build up your score that are based on the actual information in your report. Finally, one of our Home Loan Experts may be able to give you tips or offer a plan of action. You can get in touch with them by calling (888) 980-6716.

      Thanks,
      Kevin Graham

  6. Our credit scores are 659 and 614. We had problems with ccards when i got sick. We have them all paid off but 4 small ones which we are working on. We have 2 cars no late payments one ccard 9 yrs never late. We have been living in our home for 6 yrs renting never late. They are selling home now and we are trying to figure out if we could purchase it. Income is. Around 60000 net. More will be added when i am allowed to go back to work. My husband is a military vet also

    1. We can certainly help you look into your options. I’m going to recommend you speak with one of our home loan experts by calling (888) 980-6716. They can go over your situation and determine the best option for you.

      Thanks,
      Kevin Graham

    1. Hi Christina:

      You would need to build your score up to at least 580 before we could consider you for an FHA loan. Since it sounds like you’re just starting to build credit, I recommend you check out this blog post. We also have a service through our friends at QLCredit where you can see your updated credit score once a month for free without affecting your score. It will also give you personalized tips on how you can improve. Hope this helps!

      Thanks,
      Kevin Graham

  7. Hi,
    My credit score is currently at 560 and my wife’s is 700+. How will our scores be evaluated (minus all other factors) when applying for a loan? Will the determination be judged on the lowest of the two scores? The highest, or average of the two scores? I’m currently working diligently to raise my score.

    Thank you.

    1. Hi Jason:

      There are many factors that go into qualification, but if we look only at credit, here’s how it works.

      You actually have three different credit scores, one each from Experian, Equifax and TransUnion. We look at the lowest median score of all clients on the loan in order to get a qualifying score. In other words, if between the three bureaus, your wife has a median score of 720 and you have a median score of 560, yours is the one that has to count. You could get around this by not using your income to qualify, but you would have to settle for a smaller preapproval at that point. It’s up to you.

      The good news is you’re very close to the 580 that’s needed to qualify for an FHA loan. I’m going to recommend you check out our friends at QLCredit. You’ll be able to pull your credit report and score for free without affecting your score. You’ll also get personalized tips on ways you can improve your score. You could also talk to one of our Home Loan Experts to get advice and they may be able to point you down the right path as well. You can get in touch with them by calling (888) 980-6716. Hope this helps!

      Thanks,
      Kevin Graham

  8. Hi looking to buy a house in the next 3 months income of 90000 a year credit score 630 and 620. Any possibility that can get approved by quicken loans? Looking for a low down payment option.? Any assistance with down payment?
    Thanks

    1. Hi Lola:

      Based on your credit score, this is something we can definitely look into for you. You can get a down payment of as low as 3% based on your credit profile. That being said, credit is not the only factor that leads to qualification. We couldn’t provide down payment assistance, but there is potential for assistance available from other sources. I’m going to suggest you get started by talking to one of our Home Loan Experts. You can get in touch with them by filling out this form or calling (888) 980-6716.

      Thanks,
      Kevin Graham

  9. Hi, my husband and I both have between 625-635 middle score. Our dti is currently less than 20%. We have perfect rental history in the same rental house for 9.5 years. I’ve been at my job for 8 years. He has been in construction for 18 years and with his current company for 1.5 years. We have 2 car loans we’ve never made a late payment (one is 2.5 years the other is 6 months old), I have 2 credit cards (one 2 years old the other 9 months old) and he has one that’s 6 months old never made a late payment on any of them. We have a few collections totaling less than a thousand dollars per each of us. Our income is 85,000/year and we are looking for approx 170,000 home. We can afford 3.5% down. Everyone has told us we need a minimum of 640 median score to qualify. What do you think? We haven’t applied yet because we are scared of a unnecessary hard inquiry but we want to move asap and buy our first home! Thank you!

    1. Hi Sam:

      Unfortunately, I’m not licensed to talk about mortgage qualification on the blog. I can answer all sorts of general knowledge questions, but in order to go over your chances to actually qualify, you would need to speak with one of our licensed Home Loan Experts. You can get in touch with them by filling out this form or calling (888) 980-6716.

      Thanks,
      Kevin Graham

  10. Hi,I purchased my home for 248,000$ but fell on hard times and was trying to refinance with a cash out option. The mortgage company that I was using I think was a scam and got my credit score reduced to a 467 from 620 with a lot of bogus inquiries and games. Now is there any other option for me. I wanted to use the money for house repairs and bills.

    1. Hi Alicia:

      Unfortunately, you need to get your credit score up. Our friends at QLCredit what you pull your credit report for free without affecting your score and you can get personalized tips on where to improve. Hopefully, this will give you somewhere to start. Good luck!

      Thanks,
      Kevin Graham

  11. Hello. Credit score is 620-623 right now. Sold our home in Oct 2015. We had a few lates while struggling to sell but did sell and have $11000 that we want to put on a $93000 home we have found. Would we be able to secure a mortgage? We have 3600 car note only and excellent rental payments now for over two years

    1. Hi Lee:

      Based on what you’re telling me, we may have some options for you. I think the best way to get a more certain picture of your situation is to reach out to one of our Home Loan Experts by calling (888) 980-6716. Have a great day!

      Thanks,
      Kevin Graham

  12. Hello,
    I got a preapproval for a mortgage for 237000 with no stipulations. I put in an offer on a house paid my earnest deposit, and now things have changed. My credit score is low it’s a 612. I’m now being told that because of the taxes being so high I cannot get the house. This is rediculous. If I’m approved for that amount and my mortgage and taxes fall less the 237 what is the problem? Can you please explain and are there any other options out there for a fha process?

    1. Hi Anita:

      The loan process is sometimes complicated. The amount you pay in escrow is taken into account. That said, I’m going to pass this along to our client relations team to have someone reach out and see if they can look into your situation a little more thoroughly. I see you’ve contacted us.

      Thanks,
      Kevin Graham

    1. Hi Heather:

      We don’t use FICO 9 at this time. As a matter of company policy, we don’t disclose which model we use because it could easily change in the information become outdated. I can recommend that you speak with a Home Loan Expert who may be able to offer more information. You can get in touch with them at (888) 980-6716.

      Thanks,
      Kevin Graham

  13. My wife and I are currently selling our first home and looking to purchase another home in the next 6-7 months. In the past 3 years we have been late on our mortgage several times as we both experienced medical hardships during that time. In the past year we have not been late on our current home payments and paid off all credit cards and one auto loan. Once we sell our current home we plan to rent for that time to save additional money for a 10%-20% down payment. With the money that we save and credit scores in the 620’s w/late history would we get approved for another home loan?

    1. Hi Tim:

      I’m sorry to hear about your medical hardships. I sincerely hope for your continued health.

      I do think I have some good news for you. Since you haven’t been late on your mortgage in the past year, we should have some options we can go over with you. If you’d like, you can get preapproved online through Rocket Mortgage. If you would prefer to get started over the phone, one of our licensed Home Loan Experts would be happy to take your call at (888) 980-6716.

      Thanks,
      Kevin Graham

  14. In a nutshell:
    Credit score was getting good. Had a FICO of 725. We planned to buy a home in 2015 but we had a new addition to the family and decided to renew our condo lease for one more year until we could factor in proximity to schools, etc.
    For a lack of better words, we let ourselves go a little bit and took on higher credit card balances as to not deplete our cash too quickly. This coupled with a job loss dropped me from a 700+ credit score to 550 despite the fact that all my payments were on time and still are despite the job loss.
    Here we are ready to get our first home and most of our debts and credit card balances are near zero. We are 120 days away from the end of our lease and I have a few credit updates that I am expecting to raise my score. 1 score is 701, another is 679, and the third is 687. These updates are expected to get me up between 720 and 750.

    My question is, how likely am I to get the best possible rate out of all lenders with a 750 credit score and a credit history like what I have described? Are your rates competitive at QuickenLoans? Do you offer customized options?

    Second Question: My county offers a $15,000 down payment assistance program. Would Quicken help me facilitate and apply for this or must I do this separately?

    1. Hi Joey:

      Your credit score is pretty far up there. Based on what you’re describing, lenders including us would probably give you a very competitive rate. We do offer customized loan options based on your goals. In terms of down payment assistance, I’m going to have you talked to one of our Home Loan Experts. They could walk you through the way that process works and what your next steps would be. You can get in touch with them by filling out this form or calling (888) 980-6716. Hope this helps!

      Thanks,
      Kevin Graham

  15. Hi my husband and i had a home that we walked away from. The mtge was held by private investors. There has never been any reports to the credit companies at all. We were in the house for 20 years.but had not paid mtge or taxes for the last 5 years. We walked away last may 2016. The house has since been sold. Where do we stand at getting another mtge for another home.How much info does a Title search have on us. We would just like to know where we stand.

    1. Hi A.J.:

      To begin with, I would find it hard to believe that there have been no reports to the credit bureaus. I suspect that if you try to get a mortgage, this is going to come up. As far as a title search, that would turn up things like liens, judgments, etc. Going on the assumption that the foreclosure actually does show up on your credit report and that’s what happened here, the soonest we could help you is one year after the foreclosure. You would have more options after three years. I hope this helps!

      Thanks,
      Kevin Graham

  16. Hi,
    I had to sell my home last year as a short sale because my husband died unexpectedly and I sunk fast. Prior to his passing away, we were never late on a payment. My credit score is low now but my income is good. I purchased a manufactured home and my plan is to sell it and buy a single family house again. Does my situation qualify as extenuating circumstances? When do you think I could apply and get a mortgage?

    1. Hi Kathy:

      I’m sorry to hear about your husband. We do have an option we could look into for you right now, but you would need to talk to one of our Home Loan Experts to see if you qualify. You can get in touch with them by filling out this form or calling (888) 980-6716.

      Thanks,
      Kevin Graham

  17. Hello,

    I am looking at options between renting or trying to buy a home. My credit score isn’t so good, its a 575. I do have student loans but I am currently in school right now trying to get a degree to hopefully get a better paying job. I am currently working as a teacher. I don’t have money to put down right now to buy a home on my own, so is a better option to look for rent to own or should I just wait longer to let my credit score go up some more. Its just that the rental homes I see out there are just not big enough for what I am looking for for me and my family- three adults living together. We have to move out of the neighborhood we are currently in. It is not a good area. Thank you.

    1. Hi CC:

      With your credit score, you’re not going to be able to find a down payment option lower than 3.5% even if you get your credit score up beyond 580. With that in mind, it would probably be good if you could find another place to rent for a while while you get your credit score up. That being said, I’m going to recommend you call (888) 980-6716 and one of our Home Loan Experts will be happy to go through your options.

      Thanks,
      Kevin Graham

  18. Hi

    Me and my husband are buying our second home we have a 3 family home now that is under his name and I was going to put this under my name but I couldn’t because i have student loans of 93,000 but i make about 110,000 in income a year. my mortgage adviser told me we should put the house under both of our names. we each have credit scores of over 620 and we are trying to do a conventional loan. everything is fine we both make over $220,000 a year but he has 2 late payments on his CC that are showing on his credit report and that’s the only thing that is wrong. Are we getting the right advise. my husband does not have any student loans or anything big other than his first mortgage. all of our payments are up to date and never missed a payment. the reason why we got those 2 late payment was because the CC company forgot to send us our statements. Any help or advice would be appreciated . Thanks

    1. Hi Wilma:

      It sounds like you’re getting the right advice. Credit card payments that are late won’t matter as much to a mortgage lender as mortgage or rent payments that are late. The older they are, the less of an effect they’ll have on your overall score as well. That said, we would be happy to review your situation and possibly compete for your business. If nothing else, one of our Home Loan Experts can make sure you’re on the right track. If you give us a call at (888) 728-4702, we would be happy to go over your options.

      Thanks,
      Kevin Graham

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