If you apply for new credit, lenders will request your credit report from a major credit bureau. Generally, those who check your credit report check to see if you've been able to repay your debts, especially if they'll expect regular payments from you in the future.
Though prospective employers don't see your credit score in a credit check, they do see your open lines of credit (such as mortgages), outstanding balances, auto or student loans, foreclosures, late or missed payments, any bankruptcies and collection accounts.
Data from the past 24 months is the most important information that mortgage lenders look at.
Along with many other pieces of information, potential lenders, and creditors – including credit card companies, mortgage lenders and auto lenders – may use your credit scores and credit history to help make lending decisions. These companies want to know how likely you are to pay the money they lend back as agreed.
In a Nutshell
In the majority of states, employers can deny you employment if you have bad credit. Some states and cities have passed laws that prohibit the practice, though there are some exceptions, such as for jobs in the financial sector.
There is no minimum credit score for a job. Employers do not even have access to your score but some may check your credit history as part of the hiring process, especially if the job involves financial responsibilities or access to sensitive information.
Generally speaking, negative information such as late or missed payments, accounts that have been sent to collection agencies, accounts not being paid as agreed, or bankruptcies stays on credit reports for approximately seven years.
Home loans
Assuming you have enough income, a 720 credit score is likely high enough to help you get a government-backed mortgage such as an FHA for VA loan. However, it's probably not high enough to get the lowest interest rates available.
For instance, going from a poor credit score of around 500 to a fair credit score (in the 580-669 range) takes around 12 to 18 months of responsible credit use. Once you've made it to the good credit zone (670-739), don't expect your credit to continue rising as steadily.
Soft inquiries happen all the time without you even knowing—a company might check your credit score if they're planning on mailing you a promotional offer. These inquiries don't affect your credit score at all. But hard inquiries require your actual consent before they can happen.
The bottom line. Your credit report can't be obtained by just anyone. The FCRA lays out in what situations a credit reporting agency can provide others access to your report. Even those who want access to your report can only ask for it if they have a legally permissible reason to do so.
Now, the good news is that lenders can't just access your credit report without your consent. The Fair Credit Reporting Act states that only businesses with a legitimate reason to check your credit report can do so, and generally, you have to consent in writing to having your credit report pulled.
FICO scores are credit scores developed by the Fair Isaac Corporation (now called FICO). Used by more than 90% of major lenders, according to the company, the scores are designed to help assess a borrower's creditworthiness.
Know Your Ratios. Lenders look at your credit report to see what significant monthly debts you have, including collections and charge-offs. Using these figures, they calculate your debt-to-income ratio (DTI). A good rule of thumb is to aim for a DTI of around 36%.
Yes. Most mortgage lenders will require borrowers to submit bank statements when submitting a home loan application. In addition to your overall account balances, bank statements provide an overview of your monthly transactions, whether it's income, debt payments or other types of expenses.
Eligibility requirements: Usually, you'll need a good credit score (a FICO score of 670 or higher) to qualify for a $350K mortgage, especially if you want the best rates. Lenders may also require proof of income and other assets.
Conventional mortgages
Require a minimum down payment of 3% of the home's sale price. Tend to have much lower mortgage rates than most. Require no upfront mortgage insurance for down payments of at least 20% Have no set minimum credit score but most lenders will probably be looking for 620+
The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of mortgage. For an FHA loan, a popular choice among first-time homebuyers for its lower down payment requirement, the minimum credit score is usually around 580.
A 609 dispute letter is actually not a dispute but is simply a way of requesting that the credit bureaus provide you with certain documentation that substantiates the authenticity of the bureaus' reporting.
Although the unpaid debt will go on your credit report and have a negative impact on your score, the good news is that it won't last forever. After seven years, unpaid credit card debt falls off your credit report. The debt doesn't vanish completely, but it'll no longer impact your credit score.
Let's Summarize... If you're facing debt collection, it's important to understand how the process works and what options you have. If you ignore a debt in collections, you can be sued and have your bank account or wages garnished or may even lose property like your home. You'll also hurt your credit score.
In the U.S., the average credit score is 716, per Experian's latest data from the second quarter of 2023. And when you break down the average credit score by age, the typical American is hovering near or above that score.
What Is a Bad Credit Score? On the FICO® Score☉ 8 scale of 300 to 850, one of the credit scores lenders most frequently use, a bad credit score is one below 670. More specifically, a score between 580 and 669 is considered fair, and one between 300 and 579 is poor.
Unlike other BNPL companies, Affirm allows you to choose your payment option. Affirm generally just conducts a soft pull of applicants' credit histories, which doesn't affect their scores. Depending on your credit and eligibility, your annual percentage rate (APR) on an Affirm loan can end up being 0%, or 10% to 30%.