Credit Scores and Mortgage Loans: What Is The Minimum FICO Score?

Many people I talk with have had a few issues with their credit in the past.  Maybe an unpaid cell phone bill that went to collections, a few lates on a credit card, some have even filed bankruptcy in the past. Usually, if someone is worried about their credit, they will ask at some point in our first conversation “what is the minimum credit score that you can have and still get approved for a loan?”

While the official guidelines for credit scores are not hard and fast, here are the general rules of thumb for the various loan programs:

• FHA/VA loans = 580 or higher
• USDA loans = 620 or higher
• Conventional loans = 720 or higher

Where Do You Stand With Your Credit?

Do credit scores matter when applying for a loan?

You bet they do. Maybe more now than in any time I can remember.  Just today, I received information from Chase that they would no longer be doing any FHA/VA loans that had a credit score below 620. While this is just one lender, I think it is safe to say that lenders are tightening credit score requirements and if anything, you will need a higher credit score in order to qualify for a loan in the future.

Which Score Counts?

When a lender “pulls your credit” they will usually check with the three credit bureaus: Equifax, Experian and Transunion.  Each bureau has slightly different weighting systems to arrive at a single score, so it is important to consider all three.  The one that most mortgage lenders look at?

The middle score.

This is also called your mid-fico score.  For example: If Equifax reports that you have a 524, Transunion reports that you have a 623 and Experian reports that you have a 603 – the mortgage lender will use the 603 number.

Is a 603 good enough to qualify for an FHA loan?

It depends. Credit score alone doesn’t allow you to qualify for an FHA loan, there are other things that are taken into consideration such as job history, income, debt levels, etc. But in today’s world – at least at most lenders – a 603 credit score will not eliminate you from consideration.

Mortgage Rates For January 2, 2009

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