Home Buying: 850 Is Not the Perfect Credit Score

One of the biggest concerns for people considering home buying in these uncertain times is the infamous credit score. Is it good enough? Do I need to clean it up? Will I qualify?

Check out this list of MSN Money’s credit score FAQ’s – we at IHS Mortgage thought number eight was particularly poignant.

1. There is no fixed set number of points that a credit inquiry will cost. Generally speaking, inquires make a relatively minor contribution to overall scores.
2. Credit score calculations do not factor in where you live (city or ZIP code, for example). Effectively managing your credit, on the other hand, will result in higher scores – regardless of whether you live in Beverly Hills, Calif., or Zanesville, Ohio.
3. While most negative information must be removed from your credit report after seven years, the Fair Credit Reporting Act allows bankruptcy to be listed on your credit report for up to 10 years. It’s true a bankruptcy will negatively affect your scores, though the impact on your scores lessens over time.
4. The presence of either a foreclosure or short sale information on a credit bureau report is considered negative, as it is predictive of future credit risk. Generally speaking, both will have a similar impact on a credit score.
5. Your income does not have a direct impact on credit bureau scores, as your income information is not recorded on your credit report. The scores focus on how you manage your credit, not on how you could manage your credit given your income
6. An indication that you are working with a professional credit counselor will not, in and of itself, hurt your credit scores. However, negotiated settlements on balances owed to your creditors may affect your scores if the lenders report them as such.
7. A credit score will often consider the number of accounts or credit cards you carry that have a balance, in addition to your overall utilization of available credit. Thus, you may lose points for having a higher number of accounts with balances.
8. While 850 may be the highest FICO score, it is not a “perfect” score. The “perfect score” is what a lender requires to approve you for the credit and credit terms you are seeking.

IHS Mortgage has approved plenty of home buyers with less than “perfect” credit scores. You can check your credit score online, but really the first step on the home buying path is to talk to a mortgage professional – especially if you are concerned about your credit score. They will have to pull your credit during the qualification process anyway. Call 512.795.1800 today.

Advertisement