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Your credit score is one of the most crucial factors in determining your mortgage eligibility and interest rate. This comprehensive checklist will help you understand credit score requirements and prepare your credit profile for the home buying process.
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1. Credit Score Requirements
a. Conventional Loans
- Minimum score: 620
- Preferred score for best rates: 740+
- Score ranges and typical rates:
- 740+ : Best rates available
- 700-739: Good rates
- 680-699: Higher rates
- 620-679: Highest rates
b. FHA Loans
- Minimum score: 580 with 3.5% down
- Score 500-579: Requires 10% down
- Score below 500: Not eligible
- MIP requirements vary by score
c. VA Loans
- No official minimum score
- Most lenders require 620
- Better rates at 640+
- Best rates at 740+
d. USDA Loans
- Most lenders require 640+
- Better terms at 680+
- Automatic approval likely at 640+
- Manual underwriting below 640
2. Credit Report Review
a. Required Reports
- Pull reports from all three bureaus
- Equifax
- Experian
- TransUnion
- Check for discrepancies between reports
- Review all accounts and balances
- Note any derogatory marks
b. Key Factors to Check
- Payment history (35% of score)
- Credit utilization (30% of score)
- Length of credit history (15% of score)
- Credit mix (10% of score)
- New credit (10% of score)
3. Pre-Application Improvements
a. 6-12 Months Before
- Pay all bills on time
- Reduce credit card balances below 30%
- Avoid closing old accounts
- Don’t open new credit accounts
- Dispute any errors on credit report
b. 3-6 Months Before
- Maintain low credit card balances
- Continue perfect payment history
- Avoid applying for new credit
- Keep old accounts active
- Document all credit improvements
c. 1-3 Months Before
- Freeze credit report
- Print copies of all reports
- Document score improvements
- Prepare explanations for issues
- Gather proof of resolved items
4. Red Flags to Address
a. Major Issues
- Late payments
- Collections accounts
- Charge-offs
- Bankruptcy
- Foreclosure
- Tax liens
- Civil judgments
b. Minor Issues
- High credit utilization
- Too many inquiries
- Limited credit history
- Limited credit mix
- Recent credit applications
5. Monitoring Requirements
a. During Application
- Monitor all three scores
- Watch for new inquiries
- Track score changes
- Document all credit activities
- Keep utilization low
b. After Pre-Approval
- No new credit applications
- Keep all accounts current
- Maintain low balances
- Document any score changes
- Save all credit-related communications
6. Required Documentation
a. For Credit Issues
- Letters of explanation
- Proof of resolution
- Payment histories
- Settlement documents
- Court documents
- Release of lien documents
b. For Good Credit
- Current credit reports
- Score tracking history
- Payment histories
- Account statements
- Proof of on-time payments
- Balance reduction proof
7. Post-Closing Credit Management
a. Immediate Actions
- Continue monitoring scores
- Keep credit utilization low
- Maintain on-time payments
- Watch for mortgage reporting
- Document new account setup
b. Long-term Maintenance
- Regular credit monitoring
- Annual credit reviews
- Maintain low balances
- Keep old accounts active
- Monitor identity protection
Note: Credit requirements vary by lender and loan type. Always verify specific requirements with your chosen lender.
