Your score falls within the range of scores, from 300 to 579, considered Very Poor. A 551 FICO® Score is significantly below the average credit score.
Due to their poor credit, many lenders decline to work with borrowers whose scores are in the Very Poor range. Applicants for credit cards in this range may be required to make deposits on their cards or pay additional fees. Utility companies may also require them to place security deposits on equipment or service contracts.
Roughly 62% of consumers with credit scores under 579 are likely to become seriously delinquent (i. e. , go more than 90 days past due on a debt payment) in the future.
Purchasing a home is a significant milestone in life, and for many, it represents the culmination of years of hard work and dedication. However, the journey to homeownership can be fraught with challenges especially for those with less-than-perfect credit scores. If you find yourself in this situation, with a credit score of 551 you might be wondering if your dream of owning a home is out of reach. The good news is that it’s not impossible, but it will require careful planning, strategic maneuvering, and a willingness to explore alternative options.
Understanding the Credit Score Landscape
Before diving into the specifics of buying a house with a 551 credit score, let’s take a step back and understand the role of credit scores in the mortgage lending process. Your credit score is a three-digit number that reflects your creditworthiness, based on your past borrowing and repayment history. Lenders use this score to assess the risk of lending you money, and it significantly impacts the interest rates and loan terms you qualify for
Generally, a credit score of 620 is considered the minimum threshold for conventional loans which are the most common type of mortgage. However some lenders may offer loans to borrowers with scores as low as 500, albeit with higher interest rates and stricter eligibility requirements.
The Reality of Buying a House with a 551 Credit Score
Experian indicates that your credit score of 551 places you in the “Very Poor” credit range. As a result, you will be seen by lenders as a higher-risk borrower, with fewer options for obtaining a mortgage. However, it’s important to remember that “limited” doesn’t equate to “impossible. With the appropriate strategy and direction, you can still fulfill your dream of becoming a homeowner.”
Strategies for Homeownership with a 551 Credit Score
Here are some strategies you can employ to increase your chances of buying a house with a 551 credit score:
1. Improve Your Credit Score: This is the most crucial step. Prioritize debt reduction, reporting inaccuracies on your credit report, and building a solid payment history. Your options for loans can change significantly even with a small improvement in your credit score.
2. Take FHA Loans into consideration. These government-backed mortgages have a lower minimum credit score requirement of 500, which makes them a desirable choice for borrowers with less-than-perfect credit. But bear in mind that FHA loans usually have greater requirements for a down payment and mortgage insurance rates.
3. Explore Non-QM Loans: Non-QM loans are mortgages that don’t conform to the guidelines of Fannie Mae and Freddie Mac, the two government-sponsored enterprises that purchase most conventional mortgages. These loans may be an option for borrowers with low credit scores or other extenuating circumstances, but they often come with higher interest rates and fees.
4. Seek Co-Signer Support: If you have a friend or family member with good credit, they could co-sign your mortgage loan, essentially guaranteeing the loan and improving your chances of approval. However, it’s crucial to understand the risks and responsibilities involved in co-signing before taking this step.
5. Save for a Larger Down Payment: A larger down payment can offset your lower credit score and make you a more attractive borrower to lenders. Aim for a down payment of at least 20% of the purchase price to avoid private mortgage insurance (PMI), which can add to your monthly expenses.
6. Work with a Mortgage Broker: A mortgage broker can help you navigate the complex world of mortgage lending and find the best loan options for your situation. They can also advocate on your behalf and help you present your case to lenders in the most favorable light.
Buying a house with a 551 credit score might require extra effort and strategic planning, but it’s certainly achievable. By focusing on improving your credit score, exploring alternative loan options, and seeking expert guidance, you can overcome the challenges and turn your dream of homeownership into a reality. Remember, the journey to homeownership is a marathon, not a sprint. With patience, perseverance, and the right strategies, you can cross the finish line and secure the keys to your dream home.
How to get beyond a Very Poor credit score
A history of credit blunders or errors, such as numerous missed or late payments, defaulted or foreclosed loans, and even bankruptcies, is frequently reflected in FICO® Scores in the Very Poor range.
Obtaining your credit reports from Experian and the other two national credit bureaus, Equifax and TransUnion, is also a good idea. Your FICO® Score report can assist you in prioritizing any credit errors you should take care of first. You can better understand the mistakes in your credit history by becoming familiar with their contents, which will help you avoid them as you try to improve your credit. If you work to develop better credit habits, youll likely see improvements in your credit scores.
How to improve your 551 Credit Score
The bad news is that your FICO® score of 551 is significantly lower than the 714 average credit score. The good news is that theres plenty of opportunity to increase your score.
A smart way to begin building up a credit score is to obtain your FICO® Score. You’ll receive a report detailing the key incidents in your credit history that are bringing down your score in addition to your score. Since the data is taken straight from your credit history, it can identify problems that you can resolve to improve your credit score.
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FAQ
What can you do with a 551 credit score?
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Type of Credit
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Do You Qualify?
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Secured Credit Card
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YES
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Home Loan
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YES (FHA Loan)
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Unsecured Credit Card
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MAYBE
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Auto Loan
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NO
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What is the lowest acceptable credit score to buy a house?
How big of a loan can I get with a 550 credit score?
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Lender
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Loan Amounts
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Credit Score Requirement
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Upstart
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$1,000 – $50,000
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None
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Oportun
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$300 – $18,500
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None
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OneMain Financial
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$1,500 – $20,000
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None
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RISE
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$500 – $5,000
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None
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Can I purchase a home with a 550 credit score?
What credit score do you need to buy a house?
No specific minimum from USDA; most lenders prefer a score of 640 or above. For a conventional mortgage, a modest credit score of 620 is typically sufficient, with just a 3% down payment. However, borrowers with a lower credit score may face a higher interest rate and the cost of private mortgage insurance (PMI), especially with less than 20% down.
Can you buy a house with a 580 credit score?
If your credit score is above 580, you’re in the realm of mortgage eligibility and homeownership. With a score above 620, you should have no problem getting credit-approved to buy a house. But remember: Credit is only one piece of the puzzle.
Can you buy a house with a low credit score?
Certain loan types even allow you to buy a house with a credit score as low as 500. It’s possible to buy a house with a wide range of credit scores, but the higher your credit score, the more likely you’ll be able to secure more favorable loan terms with your lender.
Can you buy a house with a high credit score?
It’s possible to buy a house with a wide range of credit scores, but the higher your credit score, the more likely you’ll be able to secure more favorable loan terms with your lender. If you’re buying a home with cash, you won’t need to be concerned with your credit score, as you won’t be working with a lender.