Can My Credit Score Affect My Ability to Get a Mortgage?

Your credit score is an important factor used by lenders when you apply for a mortgage. Your credit score is a numerical value based on information in your credit report, which uses information from your credit history. These components – credit history, credit report, and credit score – work together to provide a picture of your past credit use and predicted future credit behavior.

A high credit score indicates that, based on your past credit usage and payment history, there is a high likelihood you will make on-time mortgage payments. A low score could mean that you have not used credit in the past and there is no credit history and credit  report available to develop a credit score, or it could mean that there are late payments, missed payments, or defaulted credit in the credit report.

Many lenders use the FICO® (Fair Isaac Corp.) model for credit scores. The FICO model for mortgage loans grades consumers on a 300- to 850-point range, with a higher score indicating less risk to the lender. In the FICO model, a score of 800 or higher is considered exceptional; 740 to 799 is very good; 670 to 739 is good; 580 to 669 is fair; and 579 or lower is poor.

There are many types of mortgages, including government-backed mortgages and traditional mortgages, available from many types of lenders. The FICO score requirement can vary by type of mortgage and amount of down payment, and your chosen mortgage lender likely offers a range of mortgage products to fit a variety of borrowers and needs.

Planning Ahead

If you are considering applying for a mortgage, ask for your credit report from all three major credit reporting agencies (Experian, Equifax, and TransUnion) right away.  Each credit reporting agency produces its own version of the credit report, and you are entitled to a free report from each agency every 12 months (and if you have been denied credit). Reviewing your credit reports before applying for a mortgage lets you know what information is included on your reports and if you need to resolve any issues that could affect your credit score.

Review your reports for errors, and if you find inaccurate or missing information, file a dispute with the credit reporting agency and the creditor. Make sure to identify each item you’re disputing and provide supporting documents to help with correcting the information.

Learn more about mortgages with The Mortgage Center at Enterprise Bank.