The Concept Of Minimum Credit Score Explained

A credit score is a tool used by banks, lenders, and other financial institutions that provide the facility of credit in gauging the capacity to pay of consumers. What is the minimum credit score for a mortgage? That depends, normally the minimum credit score shifts depending on the economy, on the state and on the type of mortgage. The goal of this article is to provide consumers with information to answer the question “What is the minimum credit score for a X?”

Normally the minimum credit score is a credit score within and above the national average. Currently the 2011fourth quarter average credit score is 692. This means that a consumer wanting to purchase goods and services on credit or wanting to take a housing or car loan has to at least have a credit score of 692 or higher. Otherwise the chance of being approved for credit is significantly lowered and even if approval is acquired the interest rate will be higher than that for consumers with higher credit scores.

While the national average is relevant, a better gauge to determine what is the minimum credit score for a mortgage is to look at the per state average credit score. This is because some states have lower or higher median scores depending on their economy. Based on Federal and state statistics:

For best results a consumer should have a credit score higher than both the national average and per state average. For example, if Mr. A wants to take out a housing loan with Company ABC for a property located in Maine He has to at least have a credit score higher than the national average credit score and the average credit score for the state of Maine. In this case Mr. A’s credit score should at least be 708.