Credit score for buying a condo - what should you have?

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Lenders take a lot of things into account when they decide whether or not to issue you with a mortgage, and nothing is more important than your credit score. While your deposit amount, income, and debt levels also come into play, your credit scores and history have a huge effect on your overall eligibility along with the interest rates available to you. While home loans for condos and detached houses are almost identical, many lenders require a slightly higher credit score for condos due to the increased complexity and risks associated with condo loans.   

Credit scores in the United States

Your credit rating is a three-digit number, with the Fair Isaac Corporation (FICO) and VantageScore the two most popular models. VantageScore is the product of three major credit reporting agencies: Experian, Equifax and TransUnion. According to a 2012 report from the Federal Trade Commission, 5 percent of consumers had an error in their report, so it's worth checking for any discrepancies before you start to apply for a mortgage. Under the Fair Credit Reporting Act, you’re entitled to a free copy of all three reports once a year.

The FICO score and other credit scores operate within the range of 300 to 850, including the following tiers:

  • Excellent Credit: 750+

  • Good Credit: 700-749

  • Fair Credit: 650-699

  • Poor Credit: 600-649

  • Bad Credit: below 600

Credit scores in Canada

Credit scores in Canada are very similar to those in the US, although instead of three major credit bureaus there are just two: Equifax and TransUnion. While similar, the scores do operate on a slightly different scale, ranging from 300 to 900 rather than 300 to 850. Due to the lower range between low and high scores, Canadians generally require a higher equivalent score than US residents.

  • Excellent Credit: 800+

  • Good Credit: 720-799

  • Fair Credit: 650-719

  • Poor Credit: 600-649

  • Bad Credit: below 600

Interest, credit scores, and home loan eligibility

Most lenders reserve the lowest interest rates for customers with an excellent credit score, which typically means 750 or more in the US and 800 or more in Canada. When you have credit this good, you will be able to access your choice of loans and get approval without needing private mortgage insurance (PMI). If you have great credit and a deposit of 25 percent or more, a wide range of home loan options will open up to you.  

A credit score of 600 or above is normally needed to access an FHA or government-insured loan with a small down payment, with 3.5 percent possible in some situations. People with a credit score below 580-600 will always be required to make a larger down payment of at least 10 percent, with a score any lower than that unlikely to be accepted at all. There are many ways you can improve your credit score or work with lenders to set more realistic goals.