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5 Requirements for a Good Credit Score

10/26/2010

In recent years, your credit score was just a minor issue if you wanted to take out a mortgage loan for a home purchase or a refinance.  Now, however, lenders are enforcing extremely strict credit score requirements.  Some minimum qualifications are outlined here.

1.  You need to have some active credit.  Active credit is like a vote of confidence and will make lenders see you as a safe, trustworthy risk.  Don't max out your credit, however.  This may make you appear irresponsible or insolvent.

2.   You need to have a history of making all payments on time.  Lenders typically look at the last two years of your history.  If you've made significant mistakes in this time, you may want to consider waiting before you apply for a mortgage.

3.  If a previous home was foreclosed on, you'll need to wait at least three years.

4.  If you've previously suffered through bankruptcy, you'll need to wait anywhere from two to seven years, depending on your circumstances.

5.  If you defaulted on student loans, you'll need to be actively paying these back.  The longer you can pay back your student loans before you apply for a mortgage, the better.

If you want to qualify for the best mortgage rates, the most important factors, of course, are that you  have a high credit score and that you have a history of making your payments on time.  It's worth waiting to apply for a mortgage if you can spend a year or two repairing your credit.  You'll save significant money in the long run with a lower interest rate.

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