Frequently Asked Questions

It depends on the loan type:

• Mortgage (Conventional): 620+
• Mortgage (FHA): 580+ (500+ with 10% down)
• Auto Loan: 600+ (660+ for best rates)
• Personal Loan: 600-640+
• Business Loan: 680+

Higher scores qualify for better interest rates. Even 20-30 points can make a significant difference in your rate.

You can check your credit score for free through:

• Credit Karma: Free FICO scores and credit monitoring
• Credit Sesame: Free credit score and analysis
• Your bank or credit card: Many offer free credit scores to customers
• AnnualCreditReport.com: Free credit reports (not scores) from all three bureaus once per year

Timeline varies based on your starting point and actions taken:

• 30 days: Paying down balances can show immediate improvement
• 3 months: Consistent on-time payments start building positive history
• 6-12 months: Significant improvements from sustained good behavior
• 7 years: Negative marks (late payments, collections) fall off

Quick wins like becoming an authorized user or disputing errors can show results in 30-60 days.

No. Checking your own credit score is a "soft inquiry" and does not affect your score.

Soft inquiries include:

• Checking your own credit
• Pre-qualification checks
• Background checks by employers
• Promotional credit offers

Hard inquiries (when you apply for credit) can temporarily lower your score by 5-10 points.

DTI (Debt-to-Income ratio) is your total monthly debt payments divided by your gross monthly income.

Example: If you make $6,000/month and have $2,000 in monthly debts, your DTI is 33%.

Why it matters:

• Shows lenders you can afford the loan payment
• Most lenders want DTI below 43%
• Below 36% is considered excellent
• High DTI is a common reason for loan denials

Use our DTI calculator to check your ratio.

Down payment requirements vary by loan type:

• Conventional Mortgage: 3-20% (20% avoids PMI)
• FHA Mortgage: 3.5% (580+ credit) or 10% (500-579 credit)
• VA Mortgage: 0% for eligible veterans
• USDA Mortgage: 0% for rural properties
• Auto Loan: 10-20% recommended (0% sometimes available)
• Personal Loan: Usually no down payment

Larger down payments typically result in better interest rates and lower monthly payments.

Yes, but you'll need additional documentation:

• 2 years of tax returns (personal and business)
• Profit & loss statements
• Bank statements (3-6 months)
• Business license or proof of self-employment
• 1099 forms

Tips for self-employed borrowers:

• Don't write off too many deductions before applying
• Show 2+ years of steady or increasing income
• Maintain a higher credit score (680+)
• Consider bank statement loans if income is hard to document

Having no credit history makes qualification harder, but not impossible:

Steps to build credit:

1. Get a secured credit card (requires deposit)
2. Become an authorized user on someone's card
3. Apply for a credit-builder loan
4. Use Experian Boost to add utility/phone payments
5. Consider a co-signer for your first loan

FHA mortgages and some lenders accept alternative credit (rent, utilities, phone bills) if you don't have traditional credit.

You should get quotes from at least 3-5 lenders to compare rates.

Rate shopping tips:

• Do all applications within 14-45 days (counts as single inquiry)
• Use pre-qualification first (soft pull, no credit impact)
• Compare banks, credit unions, and online lenders
• Look at APR, not just interest rate
• Consider fees, closing costs, and loan terms

Shopping around can save you thousands over the life of the loan.

Standard documents required:

• Government-issued ID (driver's license, passport)
• Social Security number
• Proof of income (pay stubs, W-2s, tax returns)
• Employment verification
• Bank statements (2-3 months)
• Proof of residence
• List of debts and assets

See our complete documents checklist for detailed requirements.

Pre-Qualification:

• Soft credit pull (no impact on score)
• Based on self-reported information
• Quick estimate of loan amount
• Not a commitment from lender
• Takes minutes

Pre-Approval:

• Hard credit pull (small impact on score)
• Verified documentation required
• Conditional commitment from lender
• Shows sellers you're serious
• Takes days to weeks

For home buying, pre-approval is strongly recommended.

Timeline varies by loan type:

• Personal Loan: 1-7 days
• Auto Loan: Same day to 1 week
• Mortgage: 30-45 days
• Business Loan: 1-8 weeks (SBA longer)

Factors that affect timing:

• Completeness of application
• Response time for document requests
• Complexity of financial situation
• Lender's current workload
• Property appraisal (for mortgages)

Yes, pre-approval is not a guarantee. You can be denied if:

• Your financial situation changes (job loss, new debt)
• You make large purchases before closing
• Credit score drops
• Issues found during final verification
• Property appraises for less than purchase price
• Property inspection reveals major issues

To avoid denial:

• Don't change jobs
• Don't make major purchases
• Don't apply for new credit
• Maintain stable finances
• Respond quickly to lender requests

Yes, but with higher interest rates and stricter requirements:

Options for bad credit:

• FHA loans: Accept scores as low as 500
• Subprime auto loans: Available with higher rates
• Secured loans: Use collateral to qualify
• Credit unions: Often more flexible
• Co-signer: Someone with good credit helps

Better strategy: Take 3-6 months to improve your score first. Even a 50-point increase can save thousands in interest.

You can still qualify, but must wait a certain period:

Bankruptcy waiting periods:

• Conventional: 4 years (Chapter 7), 2 years (Chapter 13)
• FHA: 2 years (Chapter 7), 1 year (Chapter 13)
• VA: 2 years
• USDA: 3 years

Foreclosure waiting periods:

• Conventional: 7 years
• FHA: 3 years
• VA: 2 years

During the waiting period, work on rebuilding credit and saving for a larger down payment.

It depends on the loan type and collection:

For mortgages:

• Medical collections under $2,000 are often ignored
• Other collections usually must be paid
• Get "pay for delete" agreements if possible

For other loans:

• Paying won't immediately improve your score
• But lenders may require it for approval
• Negotiate "pay for delete" before paying

Important: Paying a collection can reset the clock on how long it stays on your report. Consult with a credit expert first.

Yes, but student loans affect your DTI ratio:

How lenders calculate student loan payments:

• Use actual payment if on standard repayment
• 1% of total balance for income-driven plans
• $0 payment if in deferment may still count as 1% of balance

Tips with student loans:

• Get on a standard repayment plan before applying
• Pay down other debts to offset the student loan DTI impact
• Document actual payment amount
• Consider refinancing if rates are high

Interest Rate: The cost of borrowing the principal amount.

APR (Annual Percentage Rate): Interest rate plus fees and other costs, expressed as a yearly rate.

Example:

• Interest Rate: 6%
• APR: 6.3% (includes origination fees, closing costs, etc.)

Why it matters: APR gives you the true cost of the loan. Always compare APRs when shopping for loans.

Fixed Rate:

• Same rate for entire loan term
• Predictable monthly payments
• Protected from rate increases
• May start slightly higher than variable
• Best for: Long-term loans, rising rate environments

Variable/Adjustable Rate (ARM):

• Rate can change over time
• Often starts lower than fixed
• Payments can increase significantly
• Usually has rate caps
• Best for: Short-term ownership, falling rate environments

Most experts recommend fixed rates for predictability, especially for mortgages.

Yes! Interest rates are often negotiable:

How to negotiate:

1. Get quotes from multiple lenders
2. Use competing offers as leverage
3. Point out your strong qualifications
4. Ask about rate discounts (autopay, existing customer, etc.)
5. Consider buying points to lower the rate

Best negotiating power:

• High credit score
• Large down payment
• Low DTI ratio
• Strong income and assets
• Competing offers in hand