Hi, I'm looking for a loan over a million for a house with 20% down payment. I have 769 vantage score and 689 fico score. Based on research online I see most lenders use fico score. Am I screwed in terms.of interest rates? What would be my options here to get good interest rates? My fico score can't change now as late payment reflects for 7 years! Noob question: Can I refinance after couple years with improved credit scores? I read, some folks write to credit companies for exemption on a late payment. Has anyone had success stories doing it?
Late payment biggest effect on your FICO score are in the two years following the last late payment. After that, the effect reduces until it ages off entirely. Responsible use of credit and credit history are big parts. It seems like you're doing good so how many open accounts are on your credit? How many are "bad credit" accounts? Merrick Bank, Prosper, pay day loan accounts for example would count. Or some store cards. What are your credit limits? 1000? Or 10k-50k? Can you refi with better credit - yes. Though equity also plays a role at the refi stage. The risk is rates may not be better in a few years so generally don't plan on refi for a property you'd hold long term. Plan on today's payment being permanent and doing a refi being something that if it happens to work out, you'd do because it's a good financial decision.
+1 to engineeringDa, banking on refi may not be the best approach, given how unpredictable interest rates could be - as much as we want them to decrease, it's very possible it gets even higher Haven't purchased a home myself, but have been pretty invested in the credit/credit card game the last few years. FICO is by far the most used score. With 689, I'm not sure if "screwed" is the right word, but yeah it's very unlikely you'll get the best possible rate. It seems like waiting for credit score to increase isn't an option for you? A few points in terms of general factors that affect credit score: - low balance doesn't mean much unless you are looking to apply in the upcoming month. Credit score doesn't have "memory" so if you use 100% of your total credit last month, and 3% this month, the score will increase dramatically this month - the length of credit history plays a large factor in credit score - as you already mentioned, late payments are killer to credit score even if you have 25 years of perfect credit history, one missed payment can potentially drop your score 100+ points - it seems like having 3 lines of credit is the sweet spot for the best credit score, and ideally different types of credit (credit cards, car loans, mortgages, etc) - do not apply for a credit card or loan or anything in the year before applying for a mortgage to minimize impact on interest rates Not sure how much of this was new info, but hope this helps!
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I was in a similar situation when I bought a house in 2017. I had a lot less money than you though, so I went with an FHA loan. Loan was in the 6% range, refied a year later when my FICO was in the low 700’s to 4.1%. Sold that house and bought another one with a FICO of 750 at 3.6%. Refied again a year later with a FICO of 820 at 2.85%, which is what I’m at. So TL;DR, yes you can refinance or buy a new house with a lower interest rate as your credit score goes up.
Wow any suggestions on how you improved the score? I already keep my balances very low, paying on time etc. Late payment from 5 years ago is still there.
For me, I had a lot of credit card debt from my divorce. As I paid those down, and my mortgage on time, my credit score went up.