In the United States, an individual’s creditworthiness dictates whether they can qualify for a home mortgage, auto loan, credit card, or any other type of financing, and at what interest rate they would pay. Among the 258 million Americans who are credit-eligible, 232 million can be scored by FICO, approximately 90% of all Americans over age 18.
Your FICO score is a credit score that helps lenders assess your creditworthiness. It is named after the company that developed it, the Fair Isaac Corporation (FICO). This score is widely used by lenders to determine how likely you are to repay borrowed money.
FICO scores range from 300 to 850. The Higher the better and it is calculated by the following factors:
- Payment History: Your history of making on-time payments for credit cards, loans, and other debts.
- Credit Utilization: The amount of credit you are using compared to your total available credit. Lower utilization is better.
- Length of Credit History: How long you have had your credit accounts open. A longer history can be beneficial.
- Types of Credit: The variety of credit accounts you have, like credit cards, mortgages, and loans.
- New Credit: How often you have applied for new credit?
See where you are compared to others
CFPB defines FICO scores in five levels.
- Deep subprime (below 580)
- Subprime (580-619)
- Near prime (620-659)
- Prime (660-719)
- Super-prime (720 or above)
What Is a Good Credit Score to Buy a House?
To increase your odds of approval and qualify for a lower-rate mortgage, you should aim to have a credit score in the good range. That is a FICO score of 670 or higher.
The minimum credit score needed to buy a house can range from 500 to 700 but will depend on the type of mortgage loan you are applying for and your lender. Most lenders require a minimum credit score of 620 to buy a house with a conventional mortgage. Other types of mortgages have different credit score requirements:
- FHA home loans typically require a credit score of at least 500 if you put 10% down or 580 if you put 3.5% down.
- USDA loans do not have a set credit score requirement, but lenders typically require a score of at least 580.
- VA loans also do not have a set minimum credit score, but lenders typically require a score of 620 or higher.
What is a Good Credit Score to qualify for an automobile manufacturer’s finance offer?
We all know that the best rates and promotions are offered by automobile manufacturers like Ford Motor Credit or Toyota Financial Services. Great deals with the last sentence of, “for well-qualified buyers.” None of the companies will publish a specific FICO score required to be a “Well Qualified Buyer,” but it is safe to say you would need a FICO score of 700 or better to qualify.
Those great lease offers often require an even higher FICO score to qualify!
Finding your FICO score for free and without signing up for anything - it is the law!
The CFPB encourages you to review your credit reports, which you can do at no cost once a year. Go to annualcreditreport.com or call 877- 322-8228 to view your free credit reports. We also have a checklist (consumerfinance.gov/ documents/2233/201701_cfpb_Credit-report- review-checklist.pdf) you can use as you review your credit reports to help you check for errors.
https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-a-free-copy-of-my-credit-reports-en-5/
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