Your credit score, the number that lenders use to estimate the risk of extending you credit or lending you money, is a key factor in determining whether you will be approved for a mortgage. The score isn’t a fixed number but fluctuates periodically in response to changes in your credit activity (for example, if you open a new credit card account). What number is good enough, and how do scores influence the interest rate you are offered? Read on to find out.
The most common credit score is the FICO score, which was created by Fair Isaac Corporation. It is calculated using the following different bits of data from your credit report: your payment history (which represents 35% of the score), the amounts you owe (30%), length of your credit history (15%), types of credit you use (10%) and new credit (10%).
Minimum Credit Scores
There is no “official” minimum credit score since lenders can (and do) take other factors into consideration when determining if you qualify for a mortgage. You can be approved for a mortgage with a lower credit score if, for example, you have a solid down payment or your debt load is otherwise low. Since many lenders view your credit score as just one piece of the puzzle, a low score won’t necessarily prevent you from getting a mortgage.