How credit scores work when buying a home
Credit scores are an objective measure used by creditors to evaluate your credit worthiness. Credit scores are used to determine your ability to repay credit cards, consumer loans and mortgages. When applying for a mortgage, for example, the scoring model your mortgage lender uses will consider your down payment, total debt and total income, among other factors.
Here are some of the criteria used to determine if your credit is sufficient enough to help you get a mortgage:
– Payment history
– Amount of debt
– Length of credit history
– Recent applications for credit
– Number and types of credit accounts
Having good credit can help you buy a home at a favorable market rate, while having bad credit can drive up your interest rate or event prevent you from buying a home altogether! Want to see how you rate? Consumers can receive one free credit report per year. Visit the FTC website for how to request a copy. Requesting and reviewing your report can help you see where you stand, as well as to help you identify errors.
If you aren’t where you need to be to qualify for a mortgage, you can improve your credit score by paying your bills on time, paying down your debt and closing unnecessary accounts. An experienced REALTOR® or mortgage lender can help you determine if you qualify for a mortgage and, if not, what steps you need to take to get your credit back on track.
For more information on credit scores from the FTC, click here.