Question: I have a 720 credit score, yet I am having trouble getting a mortgage, for real???

Carrie:

For real?? Yes, your 720 credit score may not be all it’s cracked up to be. To get a home loan, your mortgage lender have to validate your credit.
So you’ve been told you have great credit and to focus on your number, whatever that might be and then I jump in and tell you that 720 you’ve worked so hard for just might not cut it anymore? What’s up with that?!? I know, it’s next to impossible to catch onto this moving target out there known as your credit score.
Let me help break it down for you in a couple different ways:
The good, the bad and the ugly from a mortgage perspective:
a. >740 – Excellent
b. >680 – Very good
c. >620 – Okay
d. <620 – Not acceptable
On top of that, in today’s mortgage lending environment, most (not all) mortgage investors require that we not only have a credit score, but that we also validate it by digging a little deeper. What in the world does that mean to you? Well, in simple terms, it means you actually have to have some active, established credit. You can’t have 3 lines of credit on your credit report that you’ve opened and paid off all within 6 months and have a 720 credit score that we can use for a mortgage loan. That isn’t considered a predictive score because there isn’t enough history to actually say that your credit score is valid. You haven’t paid your bills long enough to show the likelihood of continuing to do so is indicative of having “excellent” credit history. So, what do we need to see?
1) 3 lines of credit
2) A minimum time frame of 12 months on each of at least 3 accounts
3) Active credit within the last 12 months
What about building “alternative credit”? This is still an option with a select few mortgage investors IF you don’t have a credit score that is below 620. What this means is that you can provide documentation outside of the standard types of credit that would already report to a credit bureau. Examples of these items would be rental history, utilities, cellular telephones, insurance or regular dues or club memberships that are paid on a monthly basis. The same rules apply as above, we need to verify 3 accounts, with a minimum of 12 months history and they need to have been active in the past 12 months.
If you don’t know where you stand or you know you need some help, we have the resources you need to get you on the path you need to being mortgage ready with your credit score. Contact us today to get a free copy of your credit report and an analysis of your mortgage readiness. We’re here to help take the mystery out of the whole credit conundrum.
Look forward to next week’s credit topic – What’s really in your credit score? We’ll give you the nitty-gritty and tell you the basics of what makes up your score and how you may actually hurt your score by doing some things that you and the rest of the world think make sense.

Would you like to learn more about how to qualify for a mortgage? Contact Carrie Guarrero Today!

Carrie Guarrero is producing Regional Manager and Vice President of Cornerstone Mortgage Company in Burnsville, Minnesota. If you are looking for Burnsville real estate, contact Carrie first!