Is a Low Credit Score Locking You Out?

Locked out“Can I buy a house with bad credit on my report?” She felt like she was being unfairly profiled and locked out of buying a house. She knew she could afford the mortgage payment; after all, the rent she was paying was higher than that.

Maybe her credit was inaccurately placing her in a category in which she did not belong. Maybe it is happening to you or someone you know. Here is what landlords say about people with low or no credit score.

“It is a fact that lower credit score individuals engage in riskier behaviors… Lighting off fireworks in a high-density environment, fighting, speeding, being drunk in public, DWI, driving without insurance, dealing and using drugs, etc. would be examples of risky behaviors that we would want to avoid.”
~No Nonsense Landlord

Does that describe you or the person you know who has a lower score than average? Maybe not, but that is what “they” are thinking about you when they see your credit score or see that you have no score.

A gentleman, a construction worker, wrote to me after his credit score took a dive and he wanted to restore his good name. It all started when a truck ran over his foot. He couldn’t work and medical bills piled up and slipped into collections faster than his insurance company took care of business. He was neither irresponsible nor a deadbeat. He didn’t light fireworks off in crowds nor did he drive drunk or deal drugs.

FicoScoresYou don’t need perfect credit to buy a house. A score of 580 will qualify you for an FHA loan with some lenders, and a score of 620 will qualify you for a conventional, VA, or USDA loan. However, you will have to take a higher interest rate and make a higher payment with those scores. I think it is worth taking a few months to raise your score first.

You will save yourself a lot of money if your score is at least 620 rather than 580 for the FHA loan.
Similarly, if your score is at least 740 rather than 620 for the conventional loan.

Your credit score is something you control. It is a number, and when you understand what it takes to get that number, you can make it happen. There is no need to be a victim of the credit system.

“No one can get bad credit off of their report” is a false statement. People — lawyers, credit repair specialists, and individual citizens — do get bad credit off of their reports every day of the year that the credit bureaus are open.

If you’d like to know how this is done, if you’d like to boost your credit score and qualify for a GOOD home loan, then take a look at Repair Your Credit Like the Pros: How credit attorneys and certified consultants legally delete your bad credit and restore your good name. It contains insider information from some of the top credit specialists on the planet. Loan officers and journalists tell you it’s impossible… and all the while, these people are quietly raising their scores.

If you have questions, I am happy to help the best I can. Your comments are welcome. Thanks for stopping by.

New Lower Credit Score Requirements to Get a Mortgage and Buy a House

creditscore1If you don’t have perfect credit, if you’ve had a delinquency in the past, and if your score is below “A credit,” then new lower credit score requirements by some lenders might be just the luck you need to buy a house.

The executives at the Fair Isaac Corporation have the results in from new research on credit scores and lending risk. It shows that borrowers with a credit score down to 600 should be an acceptable risk to mortgage lenders. Interestingly, this is a change from previous statistics; and the reason for the change is that consumer spending habits evolve over time.

Credit scores range from about 300 to 850. In the early 2000s, people with a scores of 640 to 680 defaulted on their loans more often than expected. As a result, many lenders raised their credit score requirement for a conventional loan up to 720 or 740. But now things have changed.

Current studies show that consumers with scores in the low to mid 600s are paying their mortgages on time more often than before. So the risk to lend to these good folks has gone down.

One thing you should know about the mortgage industry is that lenders watch what’s going on with other lenders. They watch their underwriting rules and their profitability. When they see a lender making more money, they copy what that lender is doing. (Isn’t that the way it is with most businesses?)

So now that mortgage giant Wells Fargo has lowered their credit score requirements, we can expect other lenders to jump on board the leniency train when they see Wells Fargo raking in significantly more business¬†¬† — business that proves profitable.

Not only that, but small lenders and brokers who have a correspondent lending relationship with Wells Fargo can also get folks with lower credit scores approved now. (Or, you can go directly to Wells Fargo.)

I am excited about Wells Fargo’s announcement that they will approve a conventional loan for a borrower with a 620 score. That is a full 100 points lower than many lenders! And for FHA (the 3.5% down payment loan), they’ll go down to a 600 score.

Don’t mistake this for sub-prime lending. Back in the days of easy money, sub-prime lenders were going down into the 500 score range, even for no money down. I don’t see that extreme leniency coming back.

Please feel free to share this with others who might find this news interesting or helpful. Comments are welcome. (You’ll see the comment click at the top of this post.) Thank you for stopping by.