topic Is a credit score needed to get a mortgage? in Mortgage Loans

Is a credit score needed to get a mortgage?

Anonymous — Wed, 24 Aug 2016 15:46:28 GMT

So DH started listening to the Dave Ramsey show, and is now convinced that we do not need a credit score to get a mortgage. DH wants me to close all of the credit cards, because he believes it will make our credit scores "disappear". I don't know if this has any truth to it, does it? We are currently paying down our credit card debt, so we can save up a 20% down payment for a 300k house, and we were thinking of going with a Credit Union. We also want to go with a conventional mortgage/loan. Our scores are currently hovering around 670-697, and I was hoping by the time we were ready for a mortgage our scores would be around 720-750. I would hate to make a drastic decision of eliminating our credit score, especially if it will only hurt us in the long run.

Re: Is a credit score needed to get a mortgage?

dragontears — Wed, 24 Aug 2016 16:05:41 GMT

Well first closing all your cards will NOT make your credit score "dissappear" since they will stay on your reports for 10 years after closing. Second your interest rate is determined by your score so wanting to have no score is a bad idea. The best thing you could do is pay off any balances you have on cards, let only one report a small amount and leave them all open (having no open cards hurt your score).

Re: Is a credit score needed to get a mortgage?

Anonymous — Wed, 24 Aug 2016 16:10:22 GMT

Closing all credit cards will cause a significant drop in your scores. I am 100% sure your score will not disappear by closing CCs, it will get worst. Dont know who that Ramsay character is, but my recomendation is to do the opposite of whatever he tells you to do. Good luck, imsure people here will clear all your questions.

Re: Is a credit score needed to get a mortgage?

Anonymous — Wed, 24 Aug 2016 16:11:38 GMT

No good will come from closing all your credit cards. Besides damage to your score, lenders want to see active tradelines.

Re: Is a credit score needed to get a mortgage?

echoecho — Wed, 24 Aug 2016 16:58:14 GMT

He us absolutely correct, you do not need credit score to buy a house. He just need to save up and have 300k cash to get your dream house. If he can give you that without borrowing since he likes not having any debt, good plan.

Re: Is a credit score needed to get a mortgage?

Anonymous — Wed, 24 Aug 2016 17:08:00 GMT

NACA will do a mortgage without a credit score, but they have loan limits, and in most areas it is way under $300k. I love Dave Ramsey, but I disagree with him on the whole "no credit" thing. Pay off those cards, yes. Close them, no.

Re: Is a credit score needed to get a mortgage?

Anonymous — Wed, 24 Aug 2016 17:08:06 GMT

Definitely do not close your credit cards especially any with a bal. As others have pointed out this would have a very negative impact to your scores a could very well prevent you from obtaining a mortgage. Do what you are doing and continue to reduce your debt your scores will benefit from having a lower utilization. Ramsay has a lot of good tips on budgeting and such but when it comes to anything dealing with credit I would ignore his advice entirely. Ideally you want to have a good budget and good credit scores. Unless you earn enough money pay cash for a house, car, education, ect....you will need to borrow. Having a good credit score will make it easier and you will pay a great deal less in interest. Over the course of a 30yr mortgage that can be several thousand of dollars.

Would you rather lend money to someone with a history of paying people back or someone with no history at all? This is the decision the bank has to make...show them you can both budget money and handle debt.

In closing I would add that keeping a good credit score is the best financial decision I ever made. This forum has definitely helped me to make the right decisions and understand the importance of having good credit. I hope it does the same for you!

Re: Is a credit score needed to get a mortgage?

Anonymous — Wed, 24 Aug 2016 18:39:59 GMT

@Anonymous wrote:
NACA will do a mortgage without a credit score, but they have loan limits, and in most areas it is way under $300k. I love Dave Ramsey, but I disagree with him on the whole "no credit" thing. Pay off those cards, yes. Close them, no.

Agreed, it doesn't hurt to make small purchases on a card every so often, and then PIF every month. We love Dave too, he's the reason why we've been doing so well getting out of debt.

Re: Is a credit score needed to get a mortgage?

Anonymous — Wed, 24 Aug 2016 18:40:51 GMT

Thanks, everyone.

Re: Is a credit score needed to get a mortgage?

Anonymous — Wed, 24 Aug 2016 19:31:07 GMT

@Anonymous wrote:
Thanks, everyone.

Please don't close your credit accounts. I have never listen to Dave Ramsey and respect those who do but don't buy everything he says hook, line and sinker. I wonder what data he has to back that up.

Re: Is a credit score needed to get a mortgage?

wmweeza — Wed, 24 Aug 2016 23:13:59 GMT

Dave's advice is that credit cards are evil for most people and to get a house that costs $300k..you save up $300k.

While I think some of his advice is great for those really out of hand with their finances I think mostly he's unrealistic and in some cases wrong, this is one of those.

I don't take advice from a guy who says credit cards are evil but who himself uses credit cards. (from what I have read anyway.)Yes I get he has a great income...but if they are evil why break your own rule?

Re: Is a credit score needed to get a mortgage?

onstar — Thu, 25 Aug 2016 00:36:41 GMT

Dave's right about this: people spend more when they have credit cards versus cash. This is the main reason why he tells people to get rid of credit cards. This applies to almost everybody. Only a tiny, tiny, tiny minority of people use credit cards properly 100% of the time. I'm willing to speculate that 99% of Americans, including myfico community members, have had at least 1 occasion in the past 12 months where they spent more because they were using a CC instead of cash.

Even so, I don't believe in getting rid of CC altogether. Unless you have $millions in the bank and will never need to apply for anything (mortgage loan, apartment, job, etc.), you will need your credit score to function in this economy.