What Homebuyers Need To Know About Credit Scores

<article class="post-723068 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-723068"><span class="entry-date">June 22, 2023</span><div class="entry-header center-block text-center"><h1 class="entry-title">What Homebuyers Need To Know About Credit Scores</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=What+Homebuyers+Need+To+Know+About+Credit+Scores&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fwhat-homebuyers-need-to-know-about-credit-scores%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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</div></div><div class="post-tax post-category"><span></span><a href="../category/realtor-blog/index.html" rel="tag">Realtor Blog</a></div><div class="post-tax post-post_tag"></div></div><div class="entry-content"><div><img alt="What Homebuyers Need To Know About Credit Scores Simplifying The Market" decoding="async" loading="lazy" src="https://media.agentaprd.com/sites/222/20230622-what-homebuyers-need-to-know-about-credit-scores.webp" style="display: block; margin-bottom: 5px; clear: both; max-width: 100%;" width="358"/>
<p>If you’re thinking about <a href="https://www.simplifyingthemarket.com/2023/06/06/real-estate-is-still-considered-the-best-long-term-investment-1/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: rgb(5, 99, 193);" target="_blank">buying a home</a>, you should know your credit score’s a critical piece of the puzzle when it comes to qualifying for a home loan. Lenders review your credit to assess your ability to make payments on time, to pay back debts, and more. It’s also a factor that helps determine your <a href="https://www.simplifyingthemarket.com/2023/06/07/the-main-reason-mortgage-rates-are-so-high/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: rgb(5, 99, 193);" target="_blank">mortgage rate</a>. An article from<em> Bankrate</em> <a href="https://www.bankrate.com/real-estate/what-credit-score-do-you-need-to-buy-a-house/" rel="noopener noreferrer" style="color: rgb(5, 99, 193);" target="_blank">explains</a>:</p>
<blockquote><p><em> “Your credit score is one of the most important factors lenders consider when you apply for a mortgage. Not just to qualify for the loan itself, but for the conditions: </em><strong><em>Typically, the higher your score, the lower the interest rates and better terms you’ll qualify for</em></strong><em>.”</em></p></blockquote>
<p>This means your credit score may feel even more important to your homebuying plans right now since <a href="https://www.simplifyingthemarket.com/2023/05/19/the-impact-of-changing-mortgage-rates-infographic/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: rgb(5, 99, 193);" target="_blank">mortgage rates</a> are a key factor in <a href="https://www.simplifyingthemarket.com/2023/05/31/keys-to-success-for-first-time-homebuyers/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: rgb(5, 99, 193);" target="_blank">affordability</a>, especially today. According to the <em>Federal Reserve Bank of New York</em>, the median credit score in the U.S. for those taking out a mortgage is <a href="https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2023Q1" rel="noopener noreferrer" style="color: rgb(5, 99, 193);" target="_blank">765</a>. But, that doesn’t mean your credit score has to be perfect. An article from <em>Business Insider </em><a href="https://www.businessinsider.com/personal-finance/what-credit-score-is-needed-to-buy-a-house" rel="noopener noreferrer" style="color: rgb(5, 99, 193);" target="_blank">explains</a> generally how your <a href="https://www.myfico.com/credit-education/credit-scores" rel="noopener noreferrer" style="color: rgb(5, 99, 193);" target="_blank"><em>FICO</em></a> score range can make an impact:</p>
<blockquote><p><em>“. . . you don’t need a perfect credit score to buy a house. . . . </em><strong><em>Aiming to get your credit score in the ‘Good’ range (670 to 739) would be a great start towards qualifying for a mortgage</em></strong><em>. But if you’re wanting to qualify for the lowest rates, try to get your score within the ‘Very Good’ range (740 to 799).” </em></p></blockquote>
<p>Working with a trusted lender’s the best way to get more information on how your credit score could factor into your home loan and the mortgage rate you’re able to get. As<em> FICO </em><a href="https://www.myfico.com/credit-education/credit-scores" rel="noopener noreferrer" style="color: rgb(5, 99, 193);" target="_blank">says</a>:</p>
<blockquote><p><em>“While many lenders use credit scores like FICO Scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable. There is no single “cutoff score” used by all lenders and there are many additional factors that lenders may use to determine your actual interest rates.”</em></p></blockquote>
<p>If you’re looking for ways to improve your score, <em>Experian </em><a href="https://www.experian.com/blogs/ask-experian/what-is-the-average-credit-score-in-the-u-s/" rel="noopener noreferrer" style="color: rgb(5, 99, 193);" target="_blank">highlights</a> some things you may want to focus on:</p>
<ul>
<li><strong style="color: rgb(32, 32, 32);">Your Payment History: </strong><span style="color: rgb(32, 32, 32);">Late payments can have a negative impact by dropping your score. Focus on making payments on time and paying any existing late charges quickly.</span></li>
<li><strong style="color: rgb(32, 32, 32);">Your Debt Amount (relative to your credit limits): </strong><span style="color: rgb(32, 32, 32);">When it comes to your available credit amount, the less you’re using, the better. Focus on keeping this number as low as possible.</span></li>
<li><strong style="color: rgb(32, 32, 32);">Credit Applications: </strong><span style="color: rgb(32, 32, 32);">If you’re looking to buy, don’t apply for other credit. When you apply for new credit, it could result in a hard inquiry on your credit that drops your score.</span></li>
</ul>
<p>When you’re ready to start the <a href="https://www.simplifyingthemarket.com/2023/06/02/reasons-to-own-your-home-infographic/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" style="color: rgb(5, 99, 193);" target="_blank">homebuying</a> process, a lender will be able to assess which range your score falls in and tell you more about the specifics for each loan type.</p>
<h3>Bottom Line</h3>
<p>With affordability challenges today, prioritizing ways you can have a positive impact on your credit score could help you get a better mortgage rate. If you want to learn more, connect with a trusted lender.</p>
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