Know Your Credit Score
If you want to buy a home, you should know your credit score is a critical piece of the puzzle to qualify for a mortgage. Lenders review your credit to see if you typically make payments on time, pay back debts, and more. Your credit score can also help determine your mortgage rate.
“A credit score isn’t the only deciding factor on your mortgage application, but it’s a significent one. So, when you are house shopping, it’s important to know where your credit stands and how to use it to get the best mortgage rate possible.” (source: US Bank)
That means your credit score may feel even more important to your homebuying plans right now since mortgage rates are a key factor in affordability. According to the Federal Reserve Bank of New York, the median credit score in the U.S. for those taking out a mortgage is 770. But that doesn’t mean your credit score has to be perfect.
“Your credit score (commonly called a FICO Score) can range from 300 at the low end to 850 at the high end. A score of 740 or above is generally considered very good but you don’t need that score or above to buy a home.” (source: US Bank)
Working with a trusted lender is the best way to get more information on how your credit score could factor into your home loan and the mortgage rate you are able to get.
Ways To Improve Your Score
- Your Payment History: Late payments can have a negative impact by dropping your score. Focus on making payments on time and paying any existing late charges.
- Your Debt Amount (relative to your credit limits): When it comes to your available credit amount, the less you are using, the better. Focus on keeping this number as low as possible.
- Credit Applications: If you are looking to buy something, don’t apply for additional credit. When you apply for new credit, it could result in a hard inquiry on your credit that drops your score.
