When planning a purchase of a home, it’s important to be aware of the necessity of a good credit score. As a Real Estate Broker in the Inland Empire & High Desert area, I have helped fulfill many homebuyers’ dreams. Here are five things every buyer should know about credit, mortgage loans, and the relationship between them.
- Your credit score is based on your financial behavior. What does that mean? When you pay your bills on time, not incurring a huge amount of debt and use credit responsibly, all this will help to keep your credit score higher.
- The FICO score (your credit score) is used by lenders to determine a buyer’s credit worthiness. The score will range from 300 to 850. The higher the score the more advantageous it will be for a loan, as well as a more favorable interest rate.
- There are three credit reporting agencies: Equifax, TransUnion and Experian. They each produce a credit score and the funny thing is that they are close, but they rarely match. Your credit score is one of the top-three factors in your home purchase, next is your current debt and then your income. Mortgage lenders look at all when considering your ability to pay back a loan.
- Prior to beginning your home search, go to AnnualCreditReport.com for a free credit report once per year. This is not your credit score, just a report. This website is government regulated by the FTC. Another resource is to go to Credit Karma which is free and can be checked often with no negative impact on your score.
- If your score is low, with some diligence, you can improve it. Reduce your credit card balances, pay all your bills on time, and now that you have them, fix any errors on your credit reports.
Reach out for a strategy session to look at your personal credit situation and determine the best next step.