Where does your FICO® score stand? Across the United States, the average FICO® Score is 703 based on data from the second quarter of 2019. The average is slightly higher (717) in Connecticut. (Experian.com)
From a lending perspective, those with scores at or above 800 are said to have “exceptional credit”. “Very good” credit are those with scores ranging from 740 – 799. “Good” scores are 670-739. Those in the “fair” (580-669) and “poor” range (below 579) may find obtaining a home loan more challenging.
It is important to check your credit by regularly looking at your credit report. To get a free copy of your credit report from each of the credit-reporting companies (TransUnion, Experian, and Equifax) go online at AnnualCreditReport.com or call 1-877-322-8228. Not all credit reports are accurate – check annually with no charge.
Taking steps to improve your FICO® Score can be very helpful before applying for a mortgage or bridge loan because a higher score can help you secure the best terms and interest rates available. Here are some actions that can help improve your score over time:
Make sure you pay all of your bills on time. Unblemished and timely payment records are valued by lenders.
Keep your credit utilization at a good level. Preferably use less than 10% of your available credit each month and no more than 30%. Paying off your bills every month while fully using your credit is less effective. Raising your credit limit could help keep your percentage of utilization down. Closing an older credit card won’t help your score and it might actually hurt you.
Limit your applications for new credit to only when you really need it. Every time you open a new credit card - or take out a loan or qualify for a mortgage - the overall average age of your credit takes a hit, and the hard inquiry subtracts more points from your credit score.
Shopping around for a mortgage (getting multiple credit scores) can hurt your credit, but when credit scoring companies see different lenders pulling your credit score around the same time, they bundle multiple requests as a single query. So shop for different rates at the same time, within 14 days or less.
Note: Seeking information about your own credit score is a “soft” inquiry and won’t cost points on your score like a “hard” inquiry from a bank does.
Late payments, collections, foreclosures and chapter 13 bankruptcies hurt your credit score for 7 years. A chapter 7 bankruptcy will hurt it for 10 years. But, with the exception of the bankruptcies, the impact of the other problems diminishes as the information ages.
Improve your score and get approval fast for the lowest interest rate possible. And don’t forget, sellers love buyers with mortgage pre-approval!