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Give Yourself Credit

The numbers couldn’t align better: Mortgage rates not seen since the middle of the last century and some home prices lowered back to the beginning of this one.

But many buyers are finding the whole equation spoiled when they factor in another number: their credit score.

Indeed, FICO, the former Fair Isaac Corp., which provides the formula for the credit score used by mortgage lenders, found that nearly 30 percent of people in a recent sampling had a score under 620.

“We might be able to get a loan done at a 620 [credit score],” observes Dan O’Brien, 2011 president-elect of the Wisconsin Mortgage Professionals Association, “but it is becoming extremely difficult.”

But while certain factors can bring down a score, others can raise them. Here, some pointers on scoring the number that can put you in the homebuying game:

Know Where You Stand

The FICO score ranges from 300 to 850. While 620 is often cited as the low-end threshold, lenders don’t look for one specific score.

“There are a lot of options to consider,” O’Brien explains. Typically, higher down payments and higher rates compensate for lower scores.

With a credit score of 690 and a down payment of 20 percent of the purchase price, you may be approved – but might be charged 0.5 percent more in interest rate than a borrower with the same income, down payment and home purchase but with a score of 740.

Find An Easy Fix

Behind each score lurks a story, some leading to happy endings. William Howe, an officer with the National Association of Mortgage Brokers, shares that he “looks at the [three major] credit reports to decipher what’s going on.”

Some sub-par scores are the result of running up credit balances to the limit. Paying them down can provide may provide the boost you need to get the mortgage you want within a month or two, says Howe.

Give It Some Time

While some scores can be boosted quickly, it can take a year or more of effort to bring you score to up to a level where you can garner affordable mortgage offers.

For instance, late payments or missed payments reported to the credit bureaus can drag down the number, and only “slow passage of time over one or more years” of good bill payment habits can improve the score, relates Craig Watts, spokesperson for FICO.

Some sub-par scores are the result of black marks mistakenly attributed to your credit report. Mistaken credit record information — like an overdue credit account that isn’t actually yours — can occur fairly frequently, say experts. A lender may show you your report to review; they are also available at annualcreditreport.com.

If you do find mistakes, there are dispute procedures, and it can take some time for a fraudulent item to be lifted, warns Howe. That’s why would-be buyers should check their reports as soon as possible.

Taking time to improve a score shouldn’t be viewed as a hindrance, says Kathe Doremus, vice president of Inland Bank and Trust, Oak Brook, Ill. “You will be better off getting your money matters improved before becoming a homeowner,” she asserts.

Mind the Score

Rules now require lenders to ensure that nothing significant has changed with the borrower’s finances between when a borrower is approved for a mortgage and when the loan actually closes, notes Doremus.

So even if you are enjoying a high score and loan approval, keep up your good habits — and don’t run up credit accounts or acquire new debt, Doremus warns. If your score dips, it could impact your ability to close on the home.

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