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Why Your Credit Is So Important

Most of us don't have the ready cash to buy a home outright. In general, we need to borrow the funds from a lender. This is why credit is such an important component to the home buying process.

Your credit history determines what loans you will qualify for and the interest rate you will pay. Lenders get this credit history of you by obtaining your credit score.

What is a credit score?

A credit score provides an easy way for lenders to numerically judge your credit at a point in time. It gauges how likely you are to repay your loan in a timely manner. The better your history appears, the more attractive you become as a loan customer.

In general, the lending industry follows these house-buying guidelines:

  • Better credit scores usually lead to better rates
  • Lower scores do not automatically disqualify you
  • As your credit information changes, your score changes

So... do I need perfect credit?

Absolutely not! Don't let this concern hold you back from applying for a loan and buying a home. Lenders are running a business. If they only gave home loans to those with "perfect credit," they wouldn't be in that business for long.

If you feel you're ready for homeownership, you may be continuing to rent unnecessarily instead of building equity in the home of your dreams. And the longer you put off buying a home, the longer it will take to build equity.

Why not see what you can afford? It's easy to apply for a loan. But not every loan is the same. We have expert advice aimed specifically at first-time home buyers.

Home Buyer Tip

Understand your FICO score

Your FICO score is your credit score, which ranges between 300 and 850. The higher your credit score, the better chance you have of obtaining the best loan offers, including terms and conditions.

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