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Credit Scores, Mortgages and Loans - The Common Questions and Their Answers

Updated on December 2, 2014
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Can You Get Reputable Loans for Credit Scores Under 600?

You can get loans for credit scores under 600, but there are several things to consider before applying if your score is in that range. For one thing, many of the loans offered to those with bad credit histories charge notoriously high interest rates. Depending on the size of the loan, a difference of a few interest points can cost you thousands of dollars more. As you already have a credit score that is considered to be on the low side, more debt is the last thing you need.

There are many people that don’t even know their credit score, some of whom don’t even realize that such a thing exists! Of course, getting credit for most of them is especially difficult. Chances are if a person doesn’t pay attention to their credit score, they probably don’t pay much attention to their spending habits. Though that is not always true, it is common, and is a big part of the reason for many low credit scores. If your credit score is 650 or below, it is considered to be on the low side; the only credit you may qualify for are the high-interest loans for those with bad credit.

The interest rates on bad credit loans are very high, and you may also be subject to stricter terms and conditions than you would be with other lenders. Before you apply for such a loan, consider taking a few measures to improve your credit score and then apply for a more traditional loan. It may take you a while to get your score up to a respectable standard, as items remain on your credit file for seven years.

If you begin to correct your bad financial behavior of the past however, that will also be displayed in your credit file. If a lender sees that you have turned your life around and have taken steps to demonstrate financial responsibility, they may be more apt to lend you money, and at a better rate than a bad credit loan.

You can get reputable loans for credit scores under 600, but they are expensive. Taking the time to raise your credit score over a 12 month period makes much better financial sense. That way you not only save yourself a good bit of money, but develop the confidence and self-satisfaction that comes from doing the right and responsible thing.

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Do Creditors Award Home Loans for a Credit Score of 500?

Home loans to consumers with a credit score of 500 or less are rare, though not impossible. Though the criterion for most lenders is way above that number, there are possibilities for people with bad or low credit ratings. Of course, the higher your credit score, the better your chances of being approved for any loan, but if you do have bad credit you needn’t despair. Other factors are taken into consideration, and each application considered individually. A person’s income, their current employment status, and the amount being requested are all used in the assessment.

The bottom line is that home loans for those with credit scores of 500 and below are virtually impossible to get. If your score is 500 or above however, you may qualify for a Federal Housing Administration (FHA) loan. The FHA promotes home ownership, and offers several means of helping potential home owners secure their “piece of the pie.” Generally less of a down payment is required, so an FHA loan is an excellent option for someone with a low credit score. They are the only organization that backs home loans for credit scores of 500.

Home loans for credit scores under 500 are rarely awarded, but a score of 500 or above may get you 100% financing with no down payment from the FHA. This is especially true if your most recent credit history shows a reversal of your previous behavior. If you have some time before you will apply for a loan, begin improving your credit score now by paying off outstanding debt and clearing up any mistakes in your credit record.

Keep in mind that the FHA sometimes makes allowances for applicants who have "insufficient credit” or a “non-traditional credit history,” and certain applicants may be able to secure home loans for credit scores under 500.

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How Does a Credit Rating Affect Mortgages?

This question is a simple, yet complex one. How a mortgage is affected by your credit rating depends as much on your credit history and several other factors. Your credit history is basically a record of how you’ve managed your debt in the past. People with short credit histories will not have as high or as low credit scores as those who have been in the market longer. Job history and where you’ve lived, and for how long, are other factors that may affect mortgage rates, and even loan approvals.

The initial affect that a credit rating has on a mortgage applicant is whether they will even be considered or not. Many lenders have a cut-off point, and applicants with scores below that set level will generally not even be considered. That level varies from lender to lender however, and it is possible that someone with a credit score of 680 will be turned down by one creditor and approved by another. A person’s credit score will also determine the amount of interest they will pay. Applicants with higher scores generally receive a lower interest rate than those with lower scores. Your credit score will also affect the amount of the mortgage you’re granted.

How Does a Mortgage Impact a Credit Score?

This is another common question consumers have. The particular effect is basically determined by how you manage your debt. If you make your payments regularly and on time, your score will rise. If you miss payments or default on the loan, the affect will be the opposite. If you are able to pay more than the minimum required, you will not only increase your credit score faster, but could also decrease the amount of interest you will have to pay.

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Can Student Loans Hurt Your Credit Score?

Another common question; the simple truth is that they can if you don’t pay them back on the terms you agreed to. Applying for a student loan will automatically affect your credit score to a degree, but not as much as if you miss payments or default on the loan. When you apply for a student loan other factors such as your proven ability to pay the loan back, whether or not you have someone to guarantee the loan, your career choice, and your academic record will be considered by the lender. The size of the loan will also be a factor along with the amount of debt you already have.

Generally speaking, if you make your loan payments on time you will actually increase your credit score. This is especially true if you have no other debt. If you do have other debt such as a credit card or car loan, the way you handle that credit will determine the effect on your credit score. Making regular payments and keeping your credit card balance below 30% of its limit will raise your score over time.

What is a Good Credit Score for a College Student?

The median score for the average American adult is around 720. For students however, a good credit score would be considered to be around 670 and above. As a person’s credit history accounts for over one third of their credit score, students with a history of only a year or two generally won’t have scores of over 700. A score in the upper 600’s is a good starting point however, and will increase over time if you’re responsible with your payments.

Lenders take into account the fact that students haven’t had much time to establish a credit rating, and so the score plays less of a role in the approval process than with other types of loans. If you can prove your ability to repay the loan and have demonstrated responsibility during your academic career, a credit score of 650 or above may well get you approval.

What Is The Best Credit Score I Can Achieve?

What’s the Best Credit Score Possible?

If you’re interested in what the best credit score possible is, you’re most likely interested in raising your credit score. A good credit score is important in today’s society as it affects more than out ability to secure a loan or open a credit card or store account. Credit scores are also consulted by employers, landlords, utility companies, and cell phone companies to name a few. A good credit score can make the difference of being hired for that new job or not, or securing that nice apartment we want or being turned down by the landlord. So, what’s the best credit score possible?

The highest credit score anyone can achieve is 850 according to FICO. FICO (Fair Isaac Corporation) are the company responsible for defining the popular credit score rating system which is the standard in today’s world. This is the credit score that you receive from the three major credit bureaus – TransUnion, Eqifax, and Experian. Not many people however have such a high rating, so you may wonder what’s an average credit score. According to the major credit bureaus, the score for the average American consumer is in the 720-730 range. That very much varies from state to state however, so it’s quite difficult to nail down a set number for what’s an average credit score.

If you’re wondering what’s the lowest credit score, it’s 300. It is almost impossible to receive such a low rating though. To receive a credit score of 300 you would have to do almost every single thing wrong in your credit history – never pay a single bill or such. It is rare for anyone to receive such a low rating, in fact only 2% of the nation’s population have scores under 500. When it comes to receiving credit however, a score of under 600 can make it very difficult. So, when it comes to what’s the lowest credit score, consider that to be anything in the 400-599 range.

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