What is a Good Credit Score to Buy a House?

If you are preparing to buy a house, you will need to know what a good credit score is to be approved for a home loan. The majority of conventional mortgages demand a 620 or higher FICO credit score to approve you. If your loan is backed up by the FHA Federal Housing Administration, then the required score drops to minimally 500 with a 10 percent down payment and to at least 580 with a 3.5 percent down payment. 

Credit Karma has done a survey of over a million of its members who purchased a home with a first time mortgage between August of 2017 and 2018 to come up with average Vantage 3.0 credit score numbers for homebuyers. 

This survey revealed that the Vantage Score for first time American home buyers is 684. 

The figure varied widely by the state and city in which you live. The Vantage Score range of credit scores for first time home buyers was from 662 to 730 (again depending on the state in which you live). Buyers in states in the Northeast and West Coast (Washington, California, and Hawaii) showed the highest credit scores while those who live in the Gulf Coast and Appalachian states of the South had the lowest credit scores. 

The credit score you need to buy a house also depends on the price of the home involved. In states where the average homes are more expensive like Hawaii (at an average of around $528,000 for a first time mortgage), the average credit score of home buyers was 715. 

In states like Indiana where the average first time home loan is $196,000, the home buyer’s score averages at 670. So while you might get an FHA loan in the 500 to 580 credit score range and a traditional mortgage for at least a 620 score, first time homebuyers’ credit scores are often significantly higher, in the 662 to 730 range.

Do Joint Credit Cards Help Build Good Credit?

If you are trying to build up good credit, getting a joint credit card with a family member (who has good credit) could be the answer to doing so more quickly. The reason is that if two people share a joint credit card account, then the card’s history becomes included on the two sets of credit reports. If your parents or spouse have better credit then you, they can share the benefit of having been approved for credit cards by themselves. 

Doing so will also allow you to get a better interest rate than you could on your own without good credit. For many people with little or poor credit, being made a joint user is the only sure way to get a good credit card with that coveted lower interest rate.

This arrangement only works if the credit card is properly managed, with you keeping a low balance and making timely payments. 

Know that both you and the joint account holder share legal responsibility for the monthly payments. If you fall behind on the payments, the issuer can pursue both of you to recover payment. You could both suffer from legal action or lawsuits and have wage garnishments should the payments become seriously delinquent. 

If you are both responsible, then the joint credit card strategy is a good idea for building up good credit.

What is a Good Credit Score?

With all of the importance attached to credit scores, you want to know what a good score actually is. Credit scores range from 300 to 850 for both FICO and Vantage scoring models. The general breakdown is that 700 or higher is considered to be good. Meanwhile a score of 800 and up is called excellent. 

Under a percent of American consumers have perfect credit (of 850). 

Getting even an excellent score is more possible than you might believe. Major credit bureau Experian provides a breakdown of the score categories along with the percentages of consumers who fall into each category. According to Experian, 19.9 percent of consumers have an excellent score of 800-850. 

The credit bureau states that 18.2 percent of people possess a very good score of from 740 to 799. Another 21.5 percent have what they call a good score of 670 to 739. Consumers with a fair credit score of from 580 to 669 equate to 20.2 percent. A last 17 percent of Americans have a poor credit score of from 300 to 579.  

Of the whole adult American population, 19 percent (around 45 million adults) do not have a credit score at all. They are called credit invisible by the Consumer Financial Protection Bureau. The reasons for this are that they lack any meaningful history of using credit, or the information on how they have used it is limited. It explains why they do not have a credit score. 

Building up a good credit score is easier than you might think. The two most important categories that the credit bureaus consider are payment history (for 35 percent of the breakdown) and credit utilization (for 30 percent). 

By paying your bills on time every month and not using more than 30 percent of your total available credit, you will be on your way to possessing a good credit score. 

Will Checking my Credit Report Hurt my Credit Scores?

You might be concerned that getting a copy of your credit report could hurt your credit scores. The good news is that pulling your own report is not considered to be an inquiry on new credit. It does not have any effect on your score. It is a smart idea to routinely review your own credit report as a matter of fact. 

Performing a self check on your report will allow you to make certain that the information which the credit reporting bureaus are sharing with lending companies is both current and accurate. 

Each of the three main credit reporting bureaus (Experian, TransUnion, and Equifax) will provide you with a free copy of your credit report once per year. If you are denied credit or you feel your identity has been stolen, you can request additional copies of your report at no cost. 

You might also want to keep a close eye on your credit score. You can do this by signing up for free with Credit Karma. There is a common myth that checking your own score will harm it, but this is not the case. When you check your own credit score, it does not impact the result. However, if credit card companies or lenders check your score, this could lower it.

When either you or a lender checks your score, it will show up on your personal credit report as an inquiry. When you use a third party service like CreditKarma, you can check your score as often as you like without creating any inquiries. 

This means that when you apply for credit, you will see the credit card issuers or lending companies listed on your credit report under inquiries. 

The credit report will also contain records for any lenders to which you did not apply who pulled your credit.

Check Credit Score

It is easy for you to confuse checking your credit report and your credit score. You can check your credit score by signing up for a service that partners with one or more of the three main credit reporting agencies Experian, Equifax, or TransUnion. 

Credit Karma is a leading example of such a free service, with over a hundred million members. Other services may entail either a charge or some other membership obligation, though they may allow you a free trial that you can cancel after checking your credit scores. 

Many such services will also give you a different credit score than an inquiring lender will see. Please check the resource section at the end of the book where you’ll find additional services besides CreditKarma.

Credit Karma provides the actual scores from the three credit reporting agencies! 

You can easily check your credit reports for free. Every year, you are allowed to receive three free credit reports (one report from each of the reporting agencies). In cases where you think you might have become a victim of identity theft or fraud, you can obtain more free credit reports. 

If a company rejects you for a credit decision, then you can also get another free credit report from the reporting agency that the lender used in making their decision. 

In order to get your annual free credit reports from all three of the primary credit reporting agencies (Equifax, Experian, and TransUnion), you should either call:

1-877-322-8228 or go to AnnualCreditReport.com

After answering several questions and proving your identity, you will receive the reports either on your computer or smart device (if you applied online) or in the mail (if you called to request them). 

You should not pay for your credit reports, neither to check your credit score!