My credit scores from the three credit reporting companies are all in the mid 700s. Everything I read online says these are good credit ratings. Yet, transunion gives each of these three scores a grade of “C”, saying you only get an A for a score of 900 or above. (I didn’t even know it goes past 850?!)
So… do I have bad credit?!
The worst problem is my student loan–it’s huge. On the other hand, my payments on it are tiny, and this is reflected in the reports I’ve seen. I only use 9% of my income to pay debt, for example. Is this going to make a difference as to how potential creditors see me, or are they just going to see that 750 (or thereabouts) and make a decision based on that? Is the “C” part of the report creditors see, or just something TransUnion does on my page that I get to see?
If they’re giving you a C, it would be on a scale where D is still good enough and only an F is a failure.
I talk to the lenders of various banks pretty frequently (my business clients often involve me in applying for loans). What I hear is that anything above 720 is enough to satisfy underwriting that the applicant is responsible, and after that it’s just an issue of how much income will justify what amount of loan. (For businesses, at least, that’s the gotcha. From the responses I see, it appears that you’ll qualify for a loan of $10,000 only if you already have $10,000,000.)
Further poking around shows something I didn’t know before–that the three credit reporting companies are now using something called Vantagescore instead of FICO. FICO is the one that’s okay at 720 or above. Vantagescore credit scores go higher.
So I may have a bad credit score! (And that, even though I have no late payments and my payments on the loans I do have are very low. The one thing is the hugeness of that student loan…)
I can’t find any information outside of the three agencies’ websites as to what lenders typically see as a “good” credit score under Vantagescore. All the information seems to assume FICO–which apparently no one uses anymore.
Okay, so basically what I want to find out is whether, in a couple of years when my wife and I start getting serious about buying a house, we’re going to get a nasty surprise telling us we can’t buy one til my student loan is paid off.
I guess to know something like this as a hypothetical, without actually trying to buy the thing, I’d need a friend in Real Estate or something…
So it appears, in a way, I got taken in by the credit reporting agencies. They’re trying to get everyone to use this “Vantagescore” instead of Fico scores, and when I paid to see my three credit scores, they gave me the vantagescores. It turns out they no longer show you your Fico score. BUT actual lenders almost universally use the Fico score, not the vantagescore. So the information I got was almost useless.
Paid a little money to myfico.com to get (one of) my Fico score(s) so now I know where I actually stand. (Turns out, it’s not bad at all.)
Beware if you get a credit score report that you’re seeing a Fico score and not a vantagescore!
The only way to get your FICO score is from FICO. That VantageScore crap is some bullshit the credit bureaus made up to compete with FICO, but as far as I know nobody that matters actually uses it, so it’s completely useless.
So, go to your bank or credit union or a mortgage lender and tell them you want to pre-qualify because you’re thinking of shopping for a house. They will run your credit and tell you how much you’d be eligible to borrow. Many realtors won’t even work with you until you’ve completed that step. There’s a smallish fee associated, but beyond that, you are under no obligation to borrow from that particular lender or at all. But you can get a picture of your financial situation with respect to your ability to obtain a mortgage. Whatever amount you’re told you’d be allowed to borrow, mentally cut that figure in half. Do not borrow every penny they tell you. Do some math or find some calculators online to figure out what your mortgage payment would be.
Example: You go to a lender to pre qualify and the lender tells you that you could borrow up to $300,000. After doing some math, you realize you’re talking about a $1500 monthly mortgage payment (which includes insurance, taxes and interest, often called a “PITI” payment). Your monthly income is only $2000, leaving you with $500 per month for gas, food, utilities, cable, savings, investments, and everything else. Maybe you want to back that down to a $200,000 mortgage, even though you qualified for $300K.
Note: Those are not real numbers, I made all that up. I have no idea what the payment would be on a $300K mortgage. Homeowners’ and property insurance rates vary by county and state, so there’s no telling without more information.
Also, be aware there is a difference between “prequalify” and “preapprove.” With a prequalify, the lender is just checking out your situation to see what you’d qualify for. With a pre-approval, you are actually applying for a loan, but will not be approved until you find a specific house and have agreed upon a price. Do not allow yourself to be pushed into pre-approval. Pre-qualify is all you’re after here, so you know what holes to plug in your financial wall prior to going shopping. This gives you an extremely long timeline (forever) between when you prequalify and when you actually get serious about buying.
Have you tried www.creditkarma.com? It was recommended to me elsewhere on the Dope, and it’s free, and it gives you your actual credit score. There’s also the ability to do “what-if” scenarios and see how they will affect your credit. Buying a home might be one of them, but I haven’t looked for that.
When I applied for a Best Buy CC earlier this year I got a copy of my credit report, which listed the things I was dinged for. Besides the expected things were these two;
1> Insufficient lines of credit. I had only one credit card. Apparently this is a Bad Thing.
2> Insufficient payment history. Because again, one CC.
So it isn’t only late payments and bad history that ding you.
I’m glad you asked this Frylock, because when I bought my new car in March, they gave me a copy of my credit score (there’s apparently a law that says they have to, I don’t know if it’s state or federal) and it was a really high number and I new FICO didn’t go that high. Turns out it was a VantageScore and now I know it’s pretty much useless since you asked this.
(And that, even though I have no late payments and my payments on the loans I do have are very low. The one thing is the hugeness of that student loan…)
