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Common Questions About Credit Scores

I get a lot of questions about credit scores. Here are some of the most common questions (and of course my answers):

Can I get a mortgage with a credit score of 450?

If you get one, it won’t be a mortgage you want.

Credit scores are calculated using a variety of models that have small differences between them and generate similar but not identical scores. The range of scores in most models is 300 to 850, with a score below 620 considered sub-prime, and a score of 450 marking the subject as a deadbeat who no honest lender will touch. If you have equity in your home, however, there are some predators who will lend to you in the expectation that when you default, they will find ways to shift the equity to themselves.

What should my target credit score be if I want the lowest possible interest rate on a mortgage?

It depends on where you start, and on how much time you have to raise your score.

If you begin with a 620 and have 18 months, shoot for a 660 which will drop the rate by about.375% (say 4.625% to 4.25%). If you begin with 680 and have 18 months, shoot for 720 which will drop the rate by about.125%. Some lenders will drop the rate by another.125% at 780, but you can’t get there from 680 in 18 months.

Note that credit scores are calculated from mathematical models, of which there are many designed for different types of users. Mortgage lenders won’t ordinarily use the same model as auto loan lenders, and some mortgage lenders use different models than others. Different models will generate different scores, and while the differences are small, your target score should include a margin of error of at least 5 points. This would make the targets discussed above 665 and 725.

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