25Feb2013
Dan Green
Author
Dan Green
Filed Under
Credit Scoring For Mortgages

Which U.S. Cities Have The Best (And Worst) Credit Scores?

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Consumers with higher credit score pay fewer loan fees with a conventional home loan

What is your credit score?

As the U.S. lenders continue to recover from the "loose" lending policies of last decade, credit scores play an increasingly larger role in mortgage approval decisions.

A high FICO score can mean the difference between a low mortgage rate and a high one; a preferred mortgage product and a "backup" one; and, a mortgage approval and a mortgage denial.

Like everything else is real estate, though, credit scores can be a local phenomenon. A recent study from credit reporting firm TransUnion breaks it down.

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San Jose, California : Top U.S. Credit Scores

A high FICO score can mean the difference between a low mortgage rate and a high one; a preferred mortgage product and a "backup" one; a mortgage approval and a mortgage denial.

Consumers with high credit scores can get access to "prime" mortgage rates as published by Freddie Mac, and can have lower costs of homeownership as compared to the general U.S. population.

Mortgage applicants with excellent credit scores can sometimes get certain loan costs waived, and can sometimes make a smaller downpayment given a certain loan type.

That's all great news for residents of San Jose, California which TransUnion identified as the nation's best city for high credit scores.

With an average credit risk of 700, the San Jose-Sunnyvale-Santa Clara region topped the next highest city by 4 points, but that city is a neighbor to the immediate north. With a score of 696, the San Francisco-Oakland-Fremont area ranked number two.

Both metropolitan regions are characterized by high income jobs related to technology, and both are designated "high-cost" areas for housing.

The top 10 cities with the lowest credit risk are :

  1. San Jose-Sunnyvale-Santa Clara, California (700)
  2. San Francisco-Oakland-Fremont, California (696)
  3. Madison, Wisconsin (694)
  4. Honolulu, Hawaii (693)
  5. Minneapolis-St. Paul-Bloomington, Minnesota-Wisconsin (691)
  6. Bridgeport-Stamford-Norwalk, Connecticut (690)
  7. Boston-Cambridge-Quincy, Massachusetts-New Hampshire (689)
  8. Oxnard-Thousand Oaks-Ventura, California (685)
  9. Portland-South Portland-Biddeford, Maine (685)
  10. Seattle-Tacoma-Bellevue, Washington (685)

It's notable that these ten regions are neither concentrated by geography, politics, or industry.

On the other end of the scale, the cities which represent the highest credit risk include Lakeland-Winter Haven, Florida (651); Las Vegas-Paradise, Nevada (650); and Memphis, Tennessee-Mississippi-Arkansas (638).

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Improve Your Credit Score Quickly

The good news is that credit scores are temporary condition; a snapshop in time. It's a basic process to increase your credit score, and one that can mean the difference between getting approved for a mortgage and getting turned down.

The basic steps to improving your credit score quickly are :

  • Do not apply for new credit cards or charge cards. Make use of what you have.
  • Bring all delinquent credit card payments current, and keep them current.
  • Do not close no-annual-fee "old cards". Rather, use them sparingly to force "reporting".
  • Reduce outstanding debt loads to an optimal debt-to-limit ratio of 30% or less. Reach this level by paying down balances, or by raising your available credit limits.

And, lastly, give it time. Credit scores are meant to predict the likelihood of you defaulting on a loan and the best predictor of how you will behave in the next 90 days is your track record of the most recent 6 months.

After 6 months of clean credit history, many people see substantial FICO changes.

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How Does Your Credit Score Affect Your Mortgage Rate

It's estimated that for every 20-point improvement in your credit score, you can save up to 0.250 percentage points on your mortgage rate.

The difference between a 640 FICO and a 740 FICO, therefore, can be the difference between a 4.50% mortgage rate and a 3.50% mortgage rate, orĀ $2,800 per year on a four hundred thousand dollar home loan.

See how your credit score affects your mortgage rate.

Click here for today's mortgage rates.

About the Author

Dan Green is a mortgage market expert, providing over 10 years of direct-to-consumer advice. NMLS #1019791. You can also connect with Dan on Twitter and on Google+.

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