The Dallas Morning News
Credit scores are rising, which is good news for home shoppers
You may not be able to score 60 points in a basketball game like the late Kobe Bryant did in his final contest, or rack up 1,206 rushing yards as a quarterback over a season as the Ravens’ Lamar Jackson accomplished in 2019. But chances are you’re scoring higher than you think when it comes to creditworthiness – and that can add up to a big win in the homebuying game.
Per a new report by Experian – one of the three major credit reporting bureaus responsible for your credit reports – the average credit score was 682 at the close of 2019. That’s an increase of two points from 2018 and the highest mark tallied in eight years. Women best their male counterparts by averaging a credit score of 686 vs. 682, and the states with the highest average credit scores include Minnesota (715), Vermont (708), South Dakota (707), New Hampshire (707) and Massachusetts (705). The report also shows that delinquency rates are dropping, on average, suggesting that consumers are handling their debts responsibly.
Mark Hamrick, a senior economic analyst for Bankrate.com in Washington D.C., said there are plenty of reasons why credit scores are heading north.
“The factors include an 11yearlong economic expansion, low unemployment rate, and rising wages. Many Americans have made it a priority to pay down debt,” he says. “And as long as the job market remains firm and inflation remains under control, this positive trend should continue.”
Having better credit is good news for home purchasers, too.
“That’s because the better your credit score, the lower your interest rates in general,” notes Lauren Bringle Jackson, an Accredited Financial Counselor® for Austin, Texasbased Self Financial.
Nathan Grant, a credit industry analyst for Credit Card Insider in Syracuse, New York, says a higher score can result in better terms on financing, higher credit limits and often lower down payments, too. It may help you qualify for better homeowner's insurance rates as well.
Mortgage lenders value two significant credit scores: the FICO score and the Vantagescore. Each score represents the likelihood that you’ll be able to repay your debts. Your credit score number also serves as a grade of sorts of your credit report.
“A poor credit score is generally between 300 to 549 for Vantagescore and 300 to 579 for FICO. Respectively, a good credit score falls between 700 to 749 and 670 to 739. Those with great credit scores fall between 740 and 850 with both scoring models,” said Grant.
Minus a good credit score, “it’s unlikely that a buyer can get approved for an FHA loan or other firsttime buyer programs,” said Scott Bates, a San Franciscobased financial expert and blogger with Moneyandbills.com. “The minimum score to qualify for programs like these is 580, but a score of 680 or more is better, especially if you want a conventional mortgage and better interest rate offers.”
You may be able to check your credit score for free via your credit card or bank. Capital One, Chase, American Express, Discover, USAA and other banks and credit card companies allow their members to view their scores regularly.
“Most major credit card issuers and even some credit unions will let you check your credit scores for free. And you can check your Vantagescore with one of the many free services available through companies like Credit Karma, Mint and Credit.com,” recommended Grant.
While looking at your score can be helpful, it’s also wise to pull a copy of your three credit reports available from Experian, Transunion and Equifax. You can do this for no charge once a year at annualcreditreport.com.
“Try to check your credit scores and credit reports at least six months before you start house hunting. That way, if you need to dispute inaccurate information or improve your credit before buying, you can,” Jackson explained. “Both disputing and building credit can take months, so the further in advance you start working on it, the better.”
If you have a lower score than desired, take steps to boost it.
“Pay down credit card balances to below 30 percent of your credit limits, as credit utilization is an important factor in determining your credit scores,” Hamrick said.
Additionally, “always make ontime payments, as this accounts for 35% of your FICO score alone. And avoid closing credit cards when they are paid off completely,” recommended Grant.
Also, if your credit history is thin, “consider using tools to build it up – such as a credit builder loan or a secured credit card,” added Jackson.