What Credit Score is Needed to Buy a House or Car?
Your credit score is one of the first things that lenders consider. A low score increases your chances of being rejected for a car loan and a home loan, and it will also increase your interest payments. An improvement of just a few points could have a massive impact on your chances of getting a low-cost loan.
But what sort of credit score do you need to buy a house and a car?
The Importance of Your Credit Score When Buying a House or Car
The average US credit score is around 680 to 700. If your score is in this range, you’re teetering on the edge of what’s considered “Good”, and while you shouldn’t have an issue getting a car loan or mortgage, you could find yourself paying more than you need to and being rejected more often than you would expect.
And if your score is much lower, your problems will intensify, and that dream of a new house and a new car becomes a distant aspiration.
Before we talk about what credit score you need to buy a house or a car, it’s worth noting that any improvement in your credit score will make your life easier, offering all of the following benefits:
- Reduced Interested Rates
- Better Terms
- Less Strain on your Finances and Debt-to-Income Ratio
- Improved Rewards
- Higher Value Cars/Houses
To improve your credit score quickly and effortlessly, contact Finance Council, a referral service that connects consumers with a number of trusted credit repair partners.
What Credit Score is Needed to Buy a House?
Your credit score is one of the main determining factors when it comes to buying a house. Lenders set their own rules and there is no pre-defined range, but generally, the following rules apply:
- Conventional Loan Requirements: 620+
- FHA Loan Requirements: 580 (3.5% Downpayment); 500 (10% Downpayment)
As for VA loans and USDA loans, there are no minimum credit score requirements. Obviously, the higher your credit score, the easier the home buying process will be and the less interest you will pay.
What Credit Score is Needed to Buy a Car?
In 2020, the average credit score for a new car loan was 721, and the average for used car loans was around 50 less. However, the majority of loans went to buyers with subprime scores of less than 600, and approximately 1 in 20 went to buyers with scores under 500.
Car loans are generally much more accommodating to low credit buyers, but it depends on the size of the loan and the type of car. For instance, new cars typically require high credit scores than used cars.
In addition, lower credit scores require much higher interest rates, and consumers with scores of less than 500 may find themselves paying 3x to 5x more than those with scores above 700.
It’s a huge difference and means the car could cost thousands of dollars more during the lifetime of the loan.
What Credit Score is Needed to Buy a Mobile Home?
As your score edges above 750, the best rates become available, and if it’s over 800, you’ll have access to the lowest rates and best terms.
If your score is between 500 and 700, you should still qualify, but as you get closer to that 500 mark, you’ll pay more and face more issues.
Credit scores below 500 will be rejected for most mobile home loans and the ones that are available have very unfavorable rates.
What to Do If Your Score is Too Low?
Improving your credit score isn’t as difficult as you might think.
It’s easy to get trapped in a cycle of poor credit and bad debt, at which point that illusive 700+ score feels like an impossibility. But with a little guidance and a few pointers, you can break the cycle and start making some improvements.
This doesn’t just apply to borrowers with low scores. It’s also true if your score is 600 or 700.
Take mortgages as an example.
By improving your score by 100 points, you could save anywhere from 0.5% to 1%. That may not sound like much, but on a mortgage of $200.000 over 30 years, the difference between 3.5% and 4.5% is over $40.000 in total interest.
In other words, that seemingly insignificant 1% will cost you over $1.300 a year for the lifetime of your loan.
The question is, do you pay that extra cash just to get a mortgage now and not later, or do you spend a few weeks improving your credit score and doing your future self a favor?
The answer should be obvious, and yet the desperation to buy a house means countless consumers rush this process and suffer as a result.
How to Improve Your Credit Score
If you know what you’re doing, it really can take just a few weeks to make significant improvements in your credit score. If not, don’t worry, as there are companies that can help you.
Finance Council is always just a free phone call away. Following a quick referral, its trusted credit partners will give you the guidance and tools you need to improve your score, making it easier to buy a house, acquire a car loan, and more.
Questions? Call 1 (888) 479-1464