Credit Scores: How Important Are They?

3 years ago, it was possible to get a mortgage even if you had “bad credit”. Today, it is very, very difficult to get a mortgage unless you have at least a “good” and sometimes a “great” credit score.

What Is A Good Credit Score?

In mortgage terms, when a lender looks at your credit score it can generally fall into these categories:

1. 760 or higher is an excellent credit score
2. 720-760 is a good credit score
3. 660-720 is a fair credit score
4. 600-660 your credit score is going to need some work
5. 599 or below: your credit score is really going to need some work before you can qualify for a mortgage

Three Tips To Improve Your Credit Score

1. Keep your open lines of credit to a maximum of three
2. Use no more than 50% of your available credit
3. Pay more than your minimum payment on your credit cards

These tips are important when trying to improve your credit score. Credit score calculations like to see only a few open lines of credit (the more you have open, the more it could hurt your score) and like to see you not having “maxed out” your lines of credit and making aggressive payments, not just the minimum.

How Important Is Your Credit Score?

Your credit score is only one of the things a lender looks at when you apply for a mortgage. The other factors they look at include income, loan to value and assets. How important is your credit score when applying for a mortgage? Important – very important!

Justin McHood is a loan officer living in the Phoenix, Arizona area. You can find Justin on Facebook, Twitter, ActiveRain or LinkedIn and he is happy to answer any mortgage-related questions that you may have.