Your Credit Score and Buying A House
Buying a house is like any other purchase you make on credit, just a lot bigger.
And that means, you want to make sure your credit score is as good as it can be, since lenders use your credit score to make decisions on what mortgages and interest rates will work best for you.
The credit agencies use a universal score for credit, with scores ranging from 300 to 850. The most common score is the FICO score which breaks down like this:
579 and below: Bad Credit
580 to 669: Fair Credit
670 to 739: Good Credit
740 to 799: Very Good Credit
800 and above: Excellent Credit
Generally speaking, a score of 720 is considered Excellent, but each lender will determine where they draw the line.
Needless to say, the better your credit score, the better your mortgage choices. To see our best current rates, click here or talk to one of our home loan specialists. And remember, the better your score, the more house you can afford since your interest rate will be lower and that means instead of paying interest you can buy more house.
It takes a while to improve your score – at least a few months - so the sooner you learn what your score is, the better. Getting a head start also means that if there are mistakes on your credit reports (which is not that unusual), you can clean them up before you’re too deep in the home buying process.
Here are some tips to help you get a handle on your credit score:
- Check with AnnualCreditReport.com to get your free annual credit report from the Big 3 credit companies – Equifax, Experian and TransUnion. These are the scores most lenders use. Look through them to make sure there are no mistakes – they happen more often than you think.
- Keep your credit card balances below 50% of your limit and if possible, below 30%. Clear out small balances on cards; it makes a big difference.
- Pay your bills on time.
- Stay consistent with payments and credit purchases. Don’t buy a new car or get a big ticket item in the months leading up to buying a house. And no new credit cards.
Keeping and building a strong credit score means when you see your dream home for sale, you will know you’re one big step closer to realizing that dream.
If you found this information helpful, you may also want to check out these articles:
- Tips for First Time Home Buyers
- How to Choose the Right Mortgage Lender
- How Much Mortgage Can You Really Afford?
Lost? Contact us for a reliable guide through the home buying process.