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What is a Great Credit Score and What Are the Benefits?
760 and above is considered perfect in most cases. The only exception is Jumbo loans sometimes give benefit to 800+ credit scores.
FHA and VA loans can typically be acquired with a 580 or higher credit score. However, 640 score will get you much better terms though.
Typically, a 700 score is considered “Fair” and every 20 points in either direction can have a positive impact on your interest rate:
Yes! A 640 credit score will work great for an FHA loan or a VA home loan historically in most cases.
Great or Excellent Credit is considered a 760 score or higher. In most cases, a score above this adds no additional benefit to the borrower.
There are lots of benefits if you possess a great credit score. Many things in life are cheaper if you have an excellent credit score. These include car insurance, home insurance, loan terms of all types, credit card rates are lower, and many more examples.
Your credit score is a snapshot in time and changes each time there’s an update to one of the accounts on your credit report.
Credit scores only look at your debts and how you’ve handled them. They do not factor in your savings or other assets you have. The main parts that factor your credit score are payment history (how many times have you been late on payments), and the amount of debt you have (are your cards near the maximum of the card limit). These are the main two, but other factors also play a lesser role in your score.
The lesser factors in your score are your credit history length, the mix of types of credit you have (installment loans, credit cards, mortgages), and how much credit is new credit. These three combined only make up less than a third of your credit score’s overall points.
An excellent credit score in the home loan process has a handful of solid benefits.
The major benefit is you will be offered a lower interest rate which will mean a lower payment for the same house. This is because you’re deemed less risky than someone with a lower score. You will also have a lower mortgage insurance rate in some cases. Finally, a higher score opens up more programs for first-time home buyers, like home-ready, and down payment assistance programs.
Paying your debts on time and paying down your overall debts is the way to improve your credit score. There are other factors as well, but these two account for two-thirds of your entire score.
Some people opt to hire a credit repair agency. Credit agencies can be helpful in speeding up the process as they often know which accounts they can petition to remove errors from your report and have experience in the process of credit repair. The downside is they are not guaranteed to work and can be costly.
These programs are called Down Payment Assistance (or DPA for short). Although there is not one credit score they all require, typically a credit score of 640 or 680 is enough to qualify for these programs. They are region specific so you’ll need to check if one is available in your area. Spire would love to help – reach out below for info on DPA’s around you!
A credit score is not the deciding factor of the size of the home or loan you can get. That is determined by your monthly income and debts. Roughly no more than half of your income can go towards your house payment and other monthly debts to qualify.
Mortgage lenders use a different scoring model than credit companies like credit cards or online credit score checkers. They use the “mortgage score” for Experian, Equifax, and Transunion. Even though you might have these bureaus’ scores, it might not be their mortgage score for them.
Each credit bureau has a different scoring model, but typically they all top out around the low to mid 800’s.
The average credit score is between 700 and 720. However, you can buy a home with a 640 in most cases and in some cases can go down to a 580 credit score.
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