Importance of Credit Score When Purchasing a Home
Posted Thursday, March 13, 2014
You’ve found the perfect home that you know should be well within your budget. Now all you need to do is secure the loan — but you’re turned down by bank after bank. In today’s economy, many buyers are facing this exact issue. They have the means to meet their potential mortgage payment. Unfortunately, an issue in the past damaged their credit score and it’s preventing them from getting a loan.
If you’re contemplating purchasing a home, especially if you’re a first-time buyer, you need to do everything you can to boost your credit score. This will make it more likely that you’ll qualify for a loan and will help you secure a lower interest rate. Below are a few steps to get you started:
Get a free credit report. You can do this at https://www.annualcreditreport.com once a year. This site is maintained by the FTC and is the only site that provides a truly 100% free credit score. There are other sites with similar names, but they are not to be trusted because they are not maintained by the FTC. If you prefer not to use the web, you can also get your free credit report by calling 1-877-322-8228.
Check your credit score. A score of 780 is excellent; however, you should be able to secure a loan with a score of around 720. If your score is low, you might want to consider renting for another year while you work to improve it.
Ensure there are no errors. If a credit card company has you defaulting on bills for a card you never opened, you could be a victim of identity theft. Start working to have any errors removed immediately — they’ll be more difficult to fix the longer you wait.
Pay down debt quickly and on time. Paying off your debt as quickly as possible and on time will help to steadily increase your credit score.
Working to maintain and improve your credit score will make purchasing a new home, or refinancing your existing one, much easier on your pocketbook and your sanity. Also, shop around and check with multiple loan agencies, such as a national bank, a local bank and a credit union because they might yield very different interest rates based on your credit score.
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