Buying with a lower credit score
Your credit score is one of several things a lender looks at. If your score is lower than you would like, you still have steps to take and questions to ask before you apply.*
What a credit score does
The CFPB describes a credit score as a prediction of your credit behavior, based on your credit reports. Lenders use scores to decide whether to approve a loan, and a score also helps set the interest rate. You do not have just one score. Scores vary by scoring model, data source and the date they are calculated.
Start with your credit reports
- The CFPB says to check your credit reports at least once a year to make sure there are no errors.
- The CFPB says requesting your own credit reports does not hurt your credit score.
- If you find an error, you can dispute it. The CFPB has a guide on how.
What may be different with a lower score
Terms can change as scores change. A lender may offer a higher interest rate or fees, ask for a larger down payment, or point you to a different loan program. Lenders set their own standards, so the same buyer can get different answers from different lenders.
Some buyers with smaller down payments ask about FHA loans. FHA sets its own credit and down payment rules, and they can change, so ask a lender what applies to you.
Compare before you decide
Ask more than one lender for a Loan Estimate and compare the rate, points and closing costs side by side. No one can promise approval or a rate before reviewing your full application.
Questions to ask a lender
- Which loan programs do you offer for my credit profile?
- What are the rate, points and closing costs on my Loan Estimate?
- How would a larger down payment or lower debts change my terms?
- What would I need to change to qualify for better terms later?
Sources
* General information only, not a loan offer, a commitment to lend or advice. Program rules, limits and fees are set by the agencies above and can change. Eligibility, rates and approval depend on credit, income, the property and the lender, and are not assured. Sinjo Thomas, NMLS #2680792, C2 Financial Corporation, NMLS #135622. See disclosures.
Talk to Sinjo at C2 Financial Corporation Opens C2 Financial's site.