The Florida Star | The Georgia Star

Popular Categories

Northeast Florida’s, Oldest, Largest, Most Read African American Owned Newspaper

A TRADITION OF EXCELLENCE SINCE 1951

" "

What Does Your Credit Score Say To A Lender?


So, you’re tired of renting, and want to buy a house, but the lender wants to check your credit score. It’s important to know what the lender sees when they look at your score. Your credit score tells a lender how much risk they will be taking by approving your loan to lend you the funds needed to purchase your home. The higher your credit score, the less risk a lender believes they are taking and the better the interest rate you will receive for your purchase.

We’ve all read the advertisements that state, “purchase a home with a 500-credit score”, well let’s look at what a lender sees when viewing a credit score. Although there is no actual score that will disqualify you for a mortgage, the object of the exercise is to increase your credit score as high as possible, as this will allow a lender to view your payment history as less of a risk to their institution. The required credit score also depends on the institution and the type of loan. Conventional loans can typically qualify at a 620-credit score, and others may be lower but be prepared to pay a higher interest rate.

Let’s look at a general guide to credit score ranking, although Experian, FICO and others may measure scores differently, here is a general breakdown:

  • Exceptional: 800+
  • Very good: 740 – 799
  • Good: 670 – 739
  • Fair: 580 – 669
  • Poor: 579 and below

If your desire is to purchase a home and your credit score is in the poor range, you may have to exercise patience, diligence and goal setting to achieve that goal. Can that goal be reached, of course it can. Getting your credit score back on track is a good sign to lenders that you are now ready and worth the risk.

A few things you can do to improve your credit score are, don’t miss payments or make late payments. Making on time payments is one of the most important facets that will be used to calculate your credit score. So please if you need to, set your payments on automatic payments to ensure they are paid on time. Applying for a new credit card will cause a hard hit on your score, which will cause your score to drop, however keeping the balance below 30% and making payments on time will help to increase your score and continue to where you want it to be. Do not close existing credit cards, as this account will be used to calculate your credit score as you continue to make on time payments. Remember to keep the balance low, and/or pay off the balance each month, but a recurring payment is needed to increase your score. Please do not run up your credit limit. If your balance is 30% or less than the credit card limit, and your payments are on time, this will help to increase your score. This means that if your credit limit is $1000, you should keep your spending below $300 each month. Once your credit score rises, you will see better interest rates and offers available to you. Prayerfully, my little nuggets are of assistance to you, but keep in mind these are merely a few suggestions to assist in purchasing a home, and as always seek a trusted realtor for any questions or concerns.

Leave a Reply