According to the FICO [Fair ISAAC & Company] credit model, a credit score of 600 is considered a risky proposition to a lender and is 120 points below the average rating.
As a general rule of thumb, a credit score of 600 is just 40 points below a level at which a mortgage may be offered without a down payment or deposit. If this is an important factor in deciding to apply for a mortgage, it may be possible to relatively quickly increase the credit score to that level in order to receive that benefit. This can be done by keeping good credit control over lenders agreements such as not falling into arrears, keeping credit balances at 30% of the total available and removing out of date entries that may be on the credit history file.
Should a mortgage be required quickly or the above steps cannot be followed in time, a borrower with a score of 600 will still likely be accepted by most lenders even considering the above average risk they present. The conditions of the mortgage would be less favourable to that of a conventional agreement and the interest rates, fees and down payments would reflect this by being more costly.
This level of credit score falls on the borderline of standard lending and Subprime lending, which means mortgage rates may vary greatly from lender to lender. For one creditor the borrower may be just above the required level for a mortgage offer outside the cut-off point for Subprime lending conditions, according to their own credit policies. For a second creditor the borrower may be slightly under the required level to obtain a standard policy and fall into the Subprime bracket. Therefore different applications made by the same person with the same credit score may differ enormously, the difference of which could result in monthly payments being hundreds of units higher per month for the same size mortgage.
It is especially worth ‘shopping around’ for a mortgage if a credit score is reflected at 600.
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