Want the power back? Learn how with these credit score basics

There is so much stress put on the credit score and what that means to your ability to qualify for a mortgage. Some people are even led to believe they can't buy without a particular credit score. As a San Antonio Realtor there are three things I suggest my clients think about when considering if their credit score will qualify them for a mortgage. What is the industry standard for a credit score, what is my bad score due to and what do I do if I have a bad score due to lack of credit history?

• Firstly, what is the industry standard when it comes to a mortgage worthy credit score? The industry standard for a typical credit score is 620 or better. However, this number changes based off the type of loan you are trying to qualify for as well as the individual lenders. What this score means is that you are or are not worth the risk that the bank is going to be taking by giving you a mortgage. Every lender is different but if your score is below 600 then there is a slim chance you will get a loan.

• The second thing to consider is why your credit score is bad? Is it due to a lack of history or a history of late payments, missed payments and/or collections? If your score is low due to negative marks against your credit, then you will need to get it above the mark for the loan your trying to get. Some simple things to do if you're trying to get your score up. Paying your credit cards down to below 50% of the available balance will help. If your balance is zero and stays zero, it doesn't improve your score, so put a tank of gas or charge something small every month. Don't immediately pay it off though, wait till you get your bill then pay it off and keep doing this every month...but don't be late! 

• Finally, we come to the hidden gem of this post, what to do if your score is low due to lack of history. There is a process out there that is built just for you and its called Manual underwriting. It is likely a term that you have never heard and what it means is that your ability to get a mortgage will be determined by a person. They will manually screen you on the list of factors other than credit score. This means coming up with at least four alternatives to prove your worthiness. These options could include something as simple as the history of paying your rent on time. If you have an electric bill, water bill, phone bill or insurance bills and can prove that you have paid them on time for a period of 12 months then they may qualify as substitutes. It is likely to be a more time-consuming process than merely getting qualified off of a credit score however, it is still a very viable possibility.

So whether you are attempting to qualify off your credit score or an alternative, there are options for you. If your credit score is low and you are trying to get it up, doing some of the things on this list may help you. If you have a lack of credit history then find a lender that does manual underwriting and tell them, you want to qualify without a credit score. If they don’t know what that is or tell you it is impossible then they are not the company for you.

As a San Antonio Realtor and not a mortgage professional nothing in this blog is intended as statement of fact. All content is for informational purposes only, consult a mortgage professional for the details of your particular situation.