FHA Loans and Your Credit Score – The Basics
For well qualified homebuyers, the number of home loan options can seem almost overwhelming. However, for those who have struggled with bad credit or who have no credit, there are fewer options than you may think. However, an FHA loan is often the one solution that is mentioned again and again as a possibility—even for those who may not have the best credit. While it is a more-flexible option than some loans, there are certain credit score requirements. Learn a bit more about what credit score you will generally need and then we’ll share three tips that may help you improve that number so you can get that loan and perhaps buy the home of your dreams.
FHA Loan Credit Score Requirements
According to the FHA website, the minimum score requirement is a FICO score of 580. However, it may be to your benefit to raise it a bit higher—just in case there are any slight changes to your score during the closing process. Slight changes in your score from month to month (or even day to day) are not unusual. If you’re not sure what your score is currently, your lender can help you check your score and show you resources so you can stay up to date with what’s happening with it on a regular basis.
Three Tips to Raise Your Score
Depending on how close your score is to the 580 mark, trying to raise the score may or may not be the right choice for you. However, if you decide to try, here are three tips that may help you improve your number and qualify for that FHA loan.
- Pull Your Report and Contact Creditors – If you have old debt on your report, get in touch with the creditors and find out if they will work with you to get the negative remarks removed from your report. Some companies are able to remove those marks if you pay off the balance.
- Pay Down Debt – Do you have a large balance on a credit card? Paying that down to a more reasonable percentage can make a difference in your score. It may even be worth using your savings to do so.
- Remove Errors – It would surprise you how many mistakes exist on credit reports. Go over yours with a fine-toothed comb and report any mistakes right away. Also, if old issues should have dropped from the report, but have not, report this too. Bankruptcies and delinquencies should stop showing after seven years.
If you would like to learn more about FHA loans, Liberty Financial of Louisville would love to help. We’ve published a free eBook all about FHA loans. Download it for free today and learn more about this lending option—so you can decide if it is right for you.