Why your credit is so important
Your credit history determines what loans you will qualify for and the interest rate you will pay. Lenders get your credit history by obtaining your credit score.
You’ll most likely need to borrow funds from a lender. This is why credit is such an important component to the home buying process.
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.
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
Do I need perfect credit?
Absolutely not. Lenders aren’t looking for consumers with “perfect credit.” 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. It’s easy to apply for a loan. We have expert advice aimed specifically at first-time homebuyers.
Improving your Credit
There are several different ways you can improve your credit score. One way is through credit counseling or debt management agencies. These are “non-profit” companies that provide several different types of services.
Do I need credit counseling?
As with anything else in life, it’s nice to have someone guide us through the rough spots. That’s essentially what credit counseling is.
Credit counselors will work with both you and your lenders to find a fair resolution. Most lenders are willing to do this because they receive some of their owed money back in a timely fashion. As you improve your credit, your score will improve as well, which can widen your choice in homes.
How can I improve my credit score?
Some people need outside help, others don’t. Here are a few things you can do:
- Cut back on unnecessary expenses
- Apply the savings to paying off debts
- Pay off and close multiple credit card accounts
Paying off your debts will generally improve your score within a few months. Keep this goal in mind and work toward it diligently.
Monitor Your Credit
Your credit score is a key determinant of the interest rates you’ll pay when borrowing money. Whether you have excellent, good, or poor credit, it’s important to monitor your credit situation.