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David Bell
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Credit Score 547 Can I Buy A House


The minimum credit score needed to buy a house can range from 500 to 700, but will ultimately depend on the type of mortgage loan you're applying for and your lender. While it's possible to get a mortgage with bad credit, you typically need good or exceptional credit to qualify for the best terms.




credit score 547 can i buy a house


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Several types of mortgage loans exist, and each one has its own minimum credit score requirement. Lenders may also have additional, stricter criteria they use to determine your creditworthiness other than your credit score (more on this below).


If you're thinking about buying a home soon, it may be worth spending some time getting your credit ready before you officially begin the process. Here are actions you can start taking now, some of which can improve your credit score relatively quickly.


Knowing where you stand is the first step to preparing your credit for a mortgage loan. You can check your credit score with Experian for free, and if it's already in the 700s or higher, you may not need to make many changes before you apply for a preapproval.


Once you have your reports, read through them and watch for items you don't recognize or you believe to be inaccurate. If you find any inaccuracies, you can ask your lender to update their information with the credit reporting agencies or dispute the items directly with the agencies. This process can improve your score quickly if it results in a negative item being removed.


Because your credit utilization rate is calculated each month when your credit card balances get reported to the credit bureaus, your credit score could respond quickly if you pay down high credit card balances.


Virtually every time you apply for credit, the lender runs a hard inquiry on your credit report. In most cases, you'll see your credit score drop by fewer than five points with one inquiry, if at all. But if you have multiple inquiries in a short period, it could have a compounding effect and lower your credit score even more. (One exception is when you apply for several of the same type of loan, such as a mortgage or car loan, as a way to compare offers. If you do so in a short time period, all the inquiries will be grouped into one, limiting the impact on your credit score.)


If your credit report includes some significant negative items, such as a bankruptcy, collection account or repossession, it may take more time for your credit score to recover than from high credit card balances or one late payment. In this case, it may be a good idea to wait until you can build a more positive credit history before applying for a large loan.


Many lenders choose not to do business with borrowers whose scores fall in the Very Poor range, on grounds they have unfavorable credit. Credit card applicants with scores in this range may be required to pay extra fees or to put down deposits on their cards. Utility companies may also require them to place security deposits on equipment or service contracts.


The bad news about your FICO Score of 547 is that it's well below the average credit score of 714. The good news is that there's plenty of opportunity to increase your score.


A smart way to begin building up a credit score is to obtain your FICO Score. Along with the score itself, you'll get a report that spells out the main events in your credit history that are lowering your score. Because that information is drawn directly from your credit history, it can pinpoint issues you can tackle to help raise your credit score.


Your FICO Score report can help you prioritize any credit missteps you should address first, but it's also good idea to get your credit reports from Experian and the other two national credit bureaus, Equifax and TransUnion. Familiarizing yourself with their contents can help you better understand the missteps in your credit history, so you'll know what to avoid as you work to build up your credit. If you work to develop better credit habits, you'll likely see improvements in your credit scores.


While it's useful to know the specific behaviors in your own credit history, the types of behaviors that can lower your credit score are well-known in general terms. Understanding them can help you focus your credit score-building tactics:


Public Information: If bankruptcies or other public records appear on your credit report, they typically hurt your credit score severely. Settling the liens or judgments at the first opportunity can reduce their impact, but in the case of bankruptcy, only time can lessen their harmful effects on your credit scores. A Chapter 7 bankruptcy will remain on your credit report for up to 10 years, and a Chapter 13 bankruptcy will stay there for 7 years. Even though your credit score may begin to recover years before a bankruptcy drops off your credit file, some lenders may refuse to work with you as long as there's a bankruptcy on your record.


Credit utilization rate. To calculate the credit utilization rate on a credit card, divide the outstanding balance by the card's borrowing limit, and multiply by 100 to get a percentage. To calculate your overall utilization rate, add up the balances on all your credit cards and divide by the sum of their borrowing limits. Most experts recommend keeping utilization below 30%, on a card-by-card basis and overall, to avoid hurting your credit score. Utilization rate contributes as much as 30% of your FICO Score.


Late or missed payments. Paying bills consistently and on time is the single best thing you can do to promote a good credit score. This can account for more than a third (35%) of your FICO Score.


Length of credit history. All other things being equal, a longer credit history will tend to yield a higher credit score than a shorter history. The number of years you've been a credit user can influence up to 15% of your FICO Score. Newcomers to the credit market cannot do much to about this factor. Patience and care to avoid bad credit behaviors will bring score improvements over time.


Total debt and credit mix. Credit scores reflect your total outstanding debt, and the types of credit you have. The FICO credit scoring system tends to favor users with several credit accounts, and a mix of revolving credit (accounts such as credit cards, that borrowing within a specific credit limit) and installment credit (loans such as mortgages and car loans, with a set number of fixed monthly payments). If you have just one type of credit account, broadening your portfolio could help your credit score. Credit mix is responsible for up to 10% of your FICO Score.


Converting a Very Poor credit score to a Fair (580-669) or a (670-739) Good one is a gradual process. It can't be done quickly (and you should avoid any business or consultant that tells you otherwise). But you can start to see some steady score improvements within a few months if you begin immediately to develop habits that promote good credit scores. Here are some good starting points:


Consider a debt-management plan. If you're having trouble repaying your loans and credit cards, a debt-management plan could bring some relief. You work with a non-profit credit-counseling agency to work out a manageable repayment schedule. Entering into a DMP effectively closes all your credit card accounts. This can severely lower your credit scores, but your scores can rebound from it more quickly than they would from bankruptcy. If this sounds too extreme for you, you may still want to consulting a credit counselor (not a credit-repair outfit) to devise a game plan for improving your credit.


Think about a credit-builder loan. Many credit unions offer these small loans, which are designed to help their members build up or rebuild their credit. There are several different types of credit-builder loan, but in one of the more popular ones, the credit union issues you a loan, but instead of giving you cash, they place it in an interest-bearing savings account. Once you've paid off the loan, you get access to the money plus the accumulated interest. It's partly a savings tool, but the real benefit comes as the credit union reports your payments to the national credit bureaus. As long as you make regular on-time payments, the loan can lead to credit-score improvements. (Before obtaining a credit-builder loan, make sure the credit union reports payments to all three national credit bureaus.)


Every growth process has to start somewhere, and a 547 FICO Score is a good beginning point for improving your credit score. Boosting your score into the fair range (580-669) could help you gain access to more credit options, lower interest rates, and reduced fees and terms. You can get rolling by getting your free credit report from Experian and checking your credit score to find out specific issues that are keeping your score from increasing. Read more about score ranges and what a good credit score is.


We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.


Most credit scores range from 300 to 850, and lenders tend to look at scores in the 500 to 600 range as less than ideal. Why does it matter what lenders think? Because they use credit scores to help assess the risk associated with lending money to you.


We just talked about how payment history is an important factor in determining your credit scores. But sometimes, even when you budget well and plan to pay on time, the exact due date can slip your mind.


There are three major credit bureaus in the United States, Equifax, Experian, and TransUnion that track your interactions with credit and debt. They use the information they gather to generate a credit report and then use a proprietary formula, such as the FICO score formula, to produce your credit score. 041b061a72


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