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RISMEDIA, February 19, 2009-(MCT)-The freewheeling days of doling out cars and homes to just anyone are over. With the nation facing a deepening financial crisis, banks have tightened their credit standards. Yet, lenders say it’s still possible for the average person to qualify.

Here’s how to get that loan.

Car loans

A consumer’s down payment, credit history and the value of the car all play a role.

At Fresno-based Murphy Bank, Vice President Richard Laxton says the bank is looking for people with a credit score of 700 or more.

“You pick up the newspaper and you read about thousands and thousands of job layoffs,” he said. “If somebody has got a weak FICO score at the moment, that’s not somebody we want to gamble on right now.”

FICO, or credit, scores range from 300 to 850, and most people score in the 600s and 700s (the higher the better), according to the Consumer Federation of America.

Brett Hedrick, general manager of Hedrick’s Chevrolet in Clovis, was reluctant to place a minimum credit score on buying a new car because of varying factors.

The down payment plays a big role, he said.

“The worse your credit is, the more money you need down,” he said.

Laxton said a typical down payment is about 15%. He said that borrowers may have better luck with small banks and credit unions because those lenders, in general, are not feeling the same pressures as big banks.

Hedrick said some dealers may be willing to search for credit for customers, but some small banks may require the customer come directly to them.

The same rules apply to used cars.

On the plus side, Laxton said, prices are low right now and so many perks are available that it’s a great time to buy.

Hedrick agreed. He encouraged shoppers wondering whether they’ll qualify to go for it.

“When you find what you want, it doesn’t hurt to give it a try and shop around,” he said.

Home loans

The days of no down payment and not-so-great credit are over.

First-time home buyers looking to buy through the government’s Federal Housing Administration loan program need a credit score of at least 600, said Mike Baker, manager of Fresno-based Resource Lenders.

The loans require a 3.5% down payment, he said.

For a conventional loan, lenders want a credit score of at least 680, Baker said. The greater the percentage of the house that must be paid for with the loan, the higher the credit score needs to be, he said.

A 20% down payment is preferred, though 10% down payments are common, he said.

Granville Homes’ preferred lender likes to see credit scores of 720 and above for a conventional loan, said sales manager Michelle Brunn.

Customers can get financing below that, but their options might be limited.

If a credit score isn’t good enough, lenders will look for “compensating factors,” Baker said. That includes getting the buyer to come up with a large down payment and show a long and steady work history.

The good news is there are easy and relatively quick credit fixes that can put buyers in a better position.

For instance, lenders don’t like to see customers who regularly go over 50% of their available credit on items like credit cards. Paying down to below 50%–and especially 30% — could cause their credit score to “skyrocket,” Baker said.

However, paying off accounts and closing them is not a good idea because it can cause scores to drop dramatically.

Granville offers buyers a monthly seminar to help improve their credit.

Brunn recommended that potential buyers meet with a reputable lender long before they make the decision to buy to come up with a game plan.

Copyright © 2009, The Fresno Bee, Calif.
Distributed by McClatchy-Tribune Information Services.