Ever since you got your social security number and you began to work, got credit cards to buy things and lived your life you've been putting together a credit score. A credit score is a three digit number based on a statistical analysis of your credit files and history that represents your creditworthiness. A credit score is usually based on the credit report information gathered from one of the three major credit bureaus that include Equifax, Experian and TransUnion.
When you get to the point in your life when you're ready to buy your first home your potential mortgage lender will use your credit score to determine whether you can qualify for financing to buy your home. Usually, the score your future lender will accept will determined by several factors including your salary history, payment history and your available credit and today a minimum score of 650 will most likely get you the financing you need to get your home.
Furthermore, your credit score will be one of the main factors that will determine what interest rate you'll get for the loan. Obviously, the better your credit score the better your interest rate will be. The difference of a couple of hundred points on your score can bring down your potential interest rate by a full point or more and that will add up to significant savings over the life of the loan.
These days if you have a credit score below 620 you may find it extremely difficult to get a conventional 30 year loan even if you have a 20 percent down payment. Even Freddie Mac and Fannie Mae have raised their credit score requirements from 580 to 620.
However, the Veterans Administration and the Federal Housing Administration now require a minimum credit score of 580 to get a loan as long as you have a three and a half percent down payment. The Veterans Administration does not require a credit score to get a loan as long as you are active or retired military personnel, but like all other loans a better credit score will yield you a better interest rate.
It is truly important to keep track of your credit score and it's suggested that you check it on a monthly basis. If you find any errors you need to contact the credit bureau right away along with your proof that an error has been made because by law they are required to correct any and all mistakes.
And lastly, be sure you make all your monthly payments on time and make sure you always have some available credit on your credit cards because these can also help keep your credit score up higher.