You may have heard that if your credit score is lower then a 720 you will not qualify for a mortgage. You may have heard that lenders favor scores in the 700s and guarantee great interest rates. When it comes to credit checks, both scenarios are not that simple. 

Lending standards are strict as a result of the mortgage crisis. However it is possible to get approved for credit lines, loans and mortgages with a score in the 600s – the problem is high interest rates. If you do have a high credit score you could still be penalized with high interest rates depending on what is on your credit report.

A subprime borrower has a credit history that upon evaluation is determined as high risk with low reliability. Subprime borrowers are penalized with high interest rates by lenders because of the higher probability they will default on a loan and make late payments. Considering the fact that homes are selling at their lowest nationally without any economic improvement in sight, it would be wise to put off homeownership and establish better credit first. The cost of repairing items on your credit report and tactfully building better credit is extremely lower then a high interest rate- by tens of thousands of dollars.  

Prime borrowers are favored by lenders since their credit report indicates responsibility with on time payments.   With a score of 720 or higher prime borrowers should be guaranteed the lowest, best interest rate. However a high number score doesn’t guarantee anything especially when lenders are looking for a path to a higher interest rate. Why would credit repair be useful to someone with a credit score in the 700s? Upon loan approval for a home, lenders evaluate income, debt and expenses! This means if they believe you can not afford it, you will be rejected or worse be offered the same high, set up to fail, interest rate as a subprime borrower. Even if you have a great score because of on-time payments, if you have too much debt you will not get approved.