Are Minimum Credit Scores going up?

We don’t know for sure, but there has been a lot of rumbling about minimum credit scores going to 640.  Most of us remember not too long ago when they went from 580 to 620.  There were a few companies that took the plunge and raised their minimum to 620.  It wasn’t too long after that the market followed.  There are few companies left that allow for scores under 620, and the ones that do typically charge higher rates or simply can’t close the loan.  So far, only a handful of mortgage companies have changed their minimum to 640, but they are major mortgage companies.  We are also hearing that some of the other major mortgage companies are discussing the possibility. 

So, what do you do?  First of all, you need to check your pipeline.  Do I have potential clients with marginal credit or credit problems?  If so, you need to make them aware that this may be coming soon.    Maybe with a since of urgency they will go ahead and buy one of the hundreds of homes they have been looking at for months and months. 

If minimum scores do go to 640 and your buyer is below that, they may want to consider credit repair.  Our company offers a state of the art credit simulator.  Here is how it works:  We run credit and say the FICO score is a 625.  If we needed a 640 score, we tell the simulator we need to improve the credit score by 15 points.  It will run an analysis on the buyer’s credit to see what would cause their score to go up.  It may be something as simple as paying down their credit card balances or writing a letter to get erroneous information removed from their credit.  The simulator is 96% accurate and well worth the money our company has invested in the technology.  The simulator has helped me repair buyer’s credit that I otherwise would not have been able to help.  The simulator works best when we are trying to bring a credit score up less than 30 points, so if your client has a 580 or below score, chances are we won’t be able to help.  In that case we can refer them to a professional credit repair counselor.

Hopefully minimum credit scores won’t go up since the housing market is still in recovery mode, but we must be prepared if they do.