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Credit and Your New Home. What You Need to Know...

To today’s consumer, credit is a big deal. A good credit score means access to home loans, car loans, credit cards and more. A poor score, on the other hand, can prove to be quite an obstacle. You may have difficulty qualifying for something as simple as a cell phone, let alone a mortgage.

As you begin to explore buying a new home, you’ll find that your credit score will play a major role in not only how much house you can afford, but the loan options available to you, too. That’s why it’s so important to stay informed about your credit – knowing your score now will prevent surprises later. Credit Score 101  It’s likely you’ve seen advertisements on the web for credit monitoring services. These services may be independent, like Credit Karma, or they may be included with your credit card or bank account. Services like these are certainly helpful; they’ll give you a general idea of your credit score, and are usually free to use.  To obtain your credit score, visit your local bank. Sit down with a representative and explain that you’re considering buying a home. The representative will furnish you with your score, a number between 300 and 850. Simply put, the higher your score, the more creditworthy you’ll appear to mortgage lenders. So where do these numbers come from? Well, the three major credit bureaus, Experian, TransUnion and Equifax collect information about you from your creditors. This compilation of info is called your credit report. Your credit report includes the following:

  • · Your name, past addresses and sometimes past employers

  • · Revolving credit accounts like credit cards

  • · Installment loans like student loans and car loans

  • · Payment history on each of these accounts

  • · Items in collections or write-offs

  • · Bankruptcies

  • · Judgments against you, like liens on property

  • · Credit inquiries

In other words, your credit report will tell lenders a lot about your creditworthiness! So how do you know if your credit is good or bad? Is My Credit Score Good or Bad? To put it very simply, it’ll be easiest for you to qualify for a home loan with a credit score of at least 700. Now, that’s not to say you can’t qualify with a lower score. There are programs which may benefit you if your score is as low as around 650. But if you’re looking for a traditional loan with favorable rates, your credit score should be on the higher end of the spectrum. Otherwise, you’ll be looking at a high down payment and higher interest rates for the life of your loan.

How to Improve Your Credit Score Every consumer has a right to one free credit report from each of the reporting bureaus every single year. Order your report from Equifax, TransUnion and Experian, then go over them very carefully. Look for information that’s incorrect or invalid. Look for accounts you don’t recognize. If you see anything out of the ordinary, dispute them through the bureaus directly. Each bureau allows consumers to submit disputes simply, online. There are other ways you can improve your credit score. On time payments, sufficient available credit, the absence of delinquent accounts and judgments and a low number of credit inquiries will all benefit your score.






If you need additional help, there are many credit counseling programs available to home buyers like you. Many are free, and I’ll be happy to assist you in finding the right program for your situation. Contact me at [503] 902-2927 or reach out tome on social media, and we can get started right away!