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Quizzes > Quizzes for Business > Finance

Take the Lender Credit Score Requirements Quiz

Evaluate Your Credit Score Lending Requirements Knowledge

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art depicting elements related to a quiz on lender credit score requirements

As your guide, Joanna Weib, I'm thrilled to present a practice quiz on lender credit score requirements that brings mortgage lending criteria to life. Whether you're a finance student or loan officer, this interactive quiz helps you apply key concepts in an engaging format. Dive into the Credit Score Quiz or test deeper knowledge with the Credit Management Quiz, then explore more quizzes to tailor for your learning journey. You'll gain actionable insights on minimum score thresholds, approval criteria, and improvement tactics. Best of all, it's fully editable in our editor to suit your needs.

What does a credit score primarily measure?
Risk of borrower repaying debt
Amount of available credit
A borrower's income stability
Length of loan terms
A credit score quantifies the risk that a borrower will repay debt. It is not a measure of income or loan term length.
What is considered an 'Excellent' FICO credit score range?
580 - 669
670 - 739
740 - 799
800 - 850
FICO categorizes scores of 800 - 850 as 'Exceptional' or 'Excellent,' reflecting low credit risk. Lower ranges correspond to lower credit tiers.
What is the minimum FICO score typically required for a conventional mortgage?
600
620
640
580
Most conventional loans require a minimum FICO score of 620. Scores below this threshold usually need different loan programs.
What is the minimum credit score required for an FHA loan to qualify for a 3.5% down payment?
580
500
620
640
FHA guidelines allow a 3.5% down payment for borrowers with a minimum FICO score of 580. Scores from 500 to 579 require 10% down.
Which statement is true regarding VA loan credit score requirements?
VA sets a national minimum of 620
VA requires 640 for zero down payment
VA requires at least 580
There is no official VA minimum; lenders set their own
The VA does not set a mandatory minimum credit score; individual lenders impose their own requirements based on risk tolerance.
Which component comprises the largest percentage of a FICO credit score calculation?
Length of credit history (15%)
Credit utilization (30%)
New credit inquiries (10%)
Payment history (35%)
FICO allocates 35% of the score to payment history, making it the most significant factor in credit score calculation.
A borrower uses 50% of their total credit limit. How does this affect their credit score?
It has little to no impact
It positively impacts the score
It resets when the next billing cycle starts
It negatively impacts the score due to high utilization
Credit utilization above 30% is viewed negatively by scoring models, as it suggests higher default risk.
Which action is most effective for quickly improving a credit score?
Paying down existing credit balances
Applying for multiple loans
Closing unused credit cards
Opening a new line of credit
Paying down balances reduces credit utilization, which can lead to a relatively fast improvement in score.
Multiple mortgage rate inquiries made within how many days are treated as a single inquiry in FICO scoring?
60 days
30 days
45 days
14 days
FICO groups rate-shopping inquiries for mortgages within a 45-day window as a single inquiry to minimize the impact on the score.
Beyond federal guidelines, what often determines a lender's minimum credit score requirement?
Borrower's savings account balance
Mortgage investor overlays
Appraisal values
State regulations
Lenders commonly add investor overlays, setting higher score thresholds than federal agency minimums to manage risk.
A borrower has a 640 FICO score and wants a USDA loan. What minimum credit score do most lenders require?
620
No official requirement
600
580
While USDA does not mandate a single national minimum, most lenders overlay a 620 credit score requirement.
With a 670 FICO score, what is the minimum down payment for a conventional first-time homebuyer?
20%
5%
3%
10%
Fannie Mae and Freddie Mac permit first-time buyers with scores of 620 or higher to put down as little as 3%.
Which factor could lead to mortgage denial even if the credit score meets the minimum?
On-time payment history
Long credit history
High debt-to-income ratio
Low credit utilization
A high debt-to-income ratio suggests the borrower may struggle with payments, which can override meeting score requirements.
A borrower's average credit account age is two years. How does this affect their FICO score?
It increases score after one year
Positively, because newer accounts boost score
No effect, since only payment history matters
Negatively, because short history lowers score
Short average age of accounts is weighted negatively in scoring as length of credit history accounts for 15%.
Which strategy is best for someone with limited credit history looking to build credit mix?
Opening multiple credit cards quickly
Taking out a small installment loan
Only using utility payments
Closing old, small-balance accounts
An installment loan adds diversity to credit mix and establishes a payment record, which boosts scoring models over time.
A borrower with two 30-day late payments in the past year and a 680 FICO score applies for a conventional mortgage. What is most likely?
Declined due to recent delinquencies
Approved without conditions
Approved but with no PMI requirement
Approved at the standard rate
Conventional underwriting often requires no delinquencies in the past 12 months; recent late payments typically trigger a decline.
What down payment is required for an FHA loan if a borrower's FICO score is 575?
10%
3.5%
20%
5%
FHA guidelines stipulate a 10% down payment for borrowers with scores between 500 and 579, while 3.5% applies at 580+.
A borrower applies for a mortgage but has six inquiries in the last month. How does FICO scoring treat these if they are all rate-shopping inquiries?
They count as one if within 14 days
They are ignored by FICO
Each inquiry counts separately
They count as one if within 45 days
FICO groups multiple mortgage rate-shopping inquiries into a single inquiry when made within a 45-day window.
If a borrower closes a credit card with a $10,000 limit and has $5,000 balance across other cards, what happens to their credit utilization ratio?
Utilization increases
Unchanged since balances remain same
Resets next billing cycle
Utilization decreases
Closing the card reduces total available credit, causing utilization to rise and potentially lowering the credit score.
A new credit user wants to quickly establish both credit history length and mix. Which is most effective?
Opening multiple secured cards at once
Taking a small installment loan
Paying utility bills on time
Being added as an authorized user on a seasoned account
Becoming an authorized user on an established account immediately adds length and diversity to the credit profile.
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Learning Outcomes

  1. Analyse typical credit score thresholds lenders use
  2. Identify factors affecting loan approval decisions
  3. Evaluate impact of credit history on lending options
  4. Apply score requirements to real-world mortgage scenarios
  5. Demonstrate understanding of minimum score guidelines
  6. Master strategies to improve credit eligibility

Cheat Sheet

  1. Credit Score Ranges - Credit scores typically range from 300 to 850, with 670 - 739 labeled "good" and 740+ hitting "very good" to "excellent." Knowing your band helps you predict what loans you can snag and at what rates. Make it a mission to understand where you stand! Kiplinger: What Is a Good Credit Score?
  2. Loan Score Requirements - Different loans have different score bars: conventional mortgages usually demand at least 620, while FHA loans might accept scores down to 500 if you're up for a bigger down payment. Use these thresholds to tailor your mortgage game plan and avoid surprises. Investopedia: Credit Score Needed for a Mortgage
  3. Approval Factors - Lenders check your credit history, income, job stability, debt-to-income ratio, and down payment size. A well-rounded profile in these areas boosts your chances of snagging that loan. Keep your financial habits in tip-top shape! NerdWallet: Mortgage Lenders & Credit Score
  4. Credit History Impact - A flawless on-time payment streak can open doors to lower interest rates and friendlier terms, while late payments or defaults can slam them shut. Think of your credit report as your report card - make it sparkle! Investopedia: Credit Score Needed for a Mortgage
  5. Mortgage Scenarios - If you have a 700 score, you might stroll into a conventional loan with sweet terms; with a 580 score, you could wind up in an FHA loan and pay more upfront. Crunch scenarios like a pro before you apply! Investopedia: Credit Score Needed for a Mortgage
  6. Score Guidelines - Each lender and loan type sets its own minimums, so one bank's 620 requirement could be another's 640. Knowing the playbook helps you aim for the right targets. Stay informed and get the edge! Investopedia: Credit Score Needed for a Mortgage
  7. Boost Your Score - Paying bills on time, shaving down balances, and avoiding new credit inquiries can give your score a turbo kick. Consistency is key, so keep those positive habits rolling and watch your credit climb! NerdWallet: Personal Loan Credit Score Requirements
  8. Debt-to-Income Ratio - Lenders love to see a DTI under 36% because it signals manageable debt levels. Lower your DTI by boosting income or paying down loans to score better approval odds and interest rates. Investopedia: Credit Score Needed for a Mortgage
  9. Employment History - Sitting two years or more with the same employer shows income stability, which lenders reward. If you've hopped around, be ready to explain your career moves with confidence. NerdWallet: Mortgage Lenders & Credit Score
  10. Loan-to-Value Ratio - A lower LTV - ideally 80% or below - means you're putting more skin in the game and lowering lender risk. Save up for a bigger down payment to unlock better rates and terms! Investopedia: Credit Score Needed for a Mortgage
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