[Y]ou hear all about the minimum credit score needed to get a credit card or loan. It seems like this one magic number seals your fate. You wonder if creditors or lenders even look at the information in your credit report or if they just use that number to get a decision for your application.
Most creditors have minimum requirements for approval. This includes a base credit score. For some, you must have a credit score above 650 or they won’t even consider you. Especially with home loans, the minimum credit score allowed is often a hard requirement, meaning there is no wiggle room for approval. However, meeting this requirement doesn’t mean you’ll automatically be approved. It is just a starting point.
A Detailed Look
Some creditors do automatic approvals or denials based on your credit score. Others will review your credit report even if you meet the minimum score requirement. They may have other requirements such as no charge-offs in the last 24 months or late payments in the past 12 months. Other creditors may question you on any negative information, allowing you a chance to explain.
Lenders may review your credit report even if you don’t meet the minimum credit score requirement. They will look for ways you can improve your credit so you can be approved. This happens mostly with home loans and some auto loans. Their goal is to gain a customer, so they want to show you how to be approved. They may even run a report that tells you how much you can expect to see your credit score improve if you take certain actions.
For example, a lender may tell you that you have a credit score of 585. However, if you can pay down your two credit cards that are maxed out, your credit score could be 625. This is not a guarantee, and they aren’t promising approval, but they give you a place to start working on improving your credit. Many times, these credit evaluations are very accurate and can help you rebuild your credit.
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