Your Credit Score and how it will effect you with a lender

Remember that department-store card you signed up for to get an instant discount? Or the medical bill you didn’t pay on time?

What seem like minor moves could drive down your credit score, which factors in big time when you’re trying to finance your future home. Lenders look at how much you make, what you own and how much you’re able to put down — but your credit score also is a major factor.

“It’s four basic factors: income, assets, credit and the property itself,” said Chad Baker, a loan officer at Prime Lending, which has offices in the UTC area and Mission Valley.

“If anything is wrong with the four, then you will have problems,” he added. “If you need a higher down payment, then you can offset it with a gift from a friend or family member. But if you’ve exhausted everything (to fix your credit,) there’s nothing you can do. So, it’s extremely important.”

The good news: Certain credit-score issues can be fixed on your own at no cost as long as you understand a few financial basics — from paying bills on time to requesting your free credit reports. Those simple pointers could help you not only qualify for a mortgage but also save you up to thousands of dollars in the long run.

They can also make or break your chances in today’s tougher lending environment, which generally requires a bigger down payment and more proof of income than during the last housing boom.

A recent study shows the average credit score for someone who successfully closed any kind of mortgage in April was 745 (with 20 percent down). The findings, based on 20 percent of loan originations in the country, are from Ellie Mae, which provides services to the mortgage industry.

The U.S. average is 692, and California’s is 691, according to FICO, which rates consumers’ credit histories on a scale of 300 to 850. So, if you don’t have the 745 score cited in the Ellie Mae study, does that mean your chances of getting a mortgage are nil? No, mortgage insiders say. U-T San Diego busts that credit myth and others in this how-to guide:

Myth: Lenders are looking for one magic number.

Fact: The score range you should shoot for depends on what kind of mortgage you want. For a conventional loan, which makes up almost 60 percent of total purchase loans in San Diego County, an ideal score is 680 or more, said Baker, of Prime Lending. For a loan backed by the Federal Housing Administration, or FHA, lenders say a safe bet is 640 and up, but some may consider scores as low as 600, Baker said. FHA loans make up more than 23 percent of purchase loans in the county, DataQuick numbers show, and usually are a go-to for first-time buyers since the down payment requirement tends to be lower.

For the best pricing, lenders are looking for a 740 or more, said Kurt Branstetter, loan officer and mortgage manager at W.J. Bradley Mortgage in San Diego. Branstetter is referring to the tiered pricing system from Fannie Mae and Freddie Mac, which own more than 60 percent of mortgages in the state.