Source: Keeping Current Matters

 

When you’re looking into buying a home, lenders really pay attention to your credit score. In fact, your credit score plays a huge role. Think of it as your financial report card that keeps track of your financial history. Lenders use it as a way of helping them decide if you qualify for a mortgage and which loan option is the best fit for you. Mortgage Report explains:

"Good credit scores communicate to lenders that you have a track record for properly managing your debts. For this reason, the higher your score, the better your chances of qualifying for a mortgage."

Unfortunately, many homebuyers don’t really know what they need for a minimum credit score to buy a home.  A report from Fannie Mae says that only 32% of homebuyers have a pretty good understanding of what they need, meaning that nearly two-thirds of potential homebuyers do not.

So how much should your credit score be?  Here’s a general idea from Experian:

“The minimum credit score needed to buy a house can range from 500 to 700, but will ultimately depend on the type of mortgage loan you're applying for and your lender. Most lenders require a minimum credit score of 620 to buy a house with a conventional mortgage.”

 

Simply put, it can vary. And even if your credit isn’t all that perfect, you still have options. FICO says:

 

“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 . . .”

 

So if your credit score need some help, hang in there – Experian has a few simple steps to help you improve it, starting with:

 1.  Pay Bills on Time

Lenders want to see you’re on top of things, so make sure you pay all your bills on time—credit cards, utilities, and cell phone bills. Regular, on-time payments show you’re responsible.

 2.  Pay Off Your Debt

Paying down your debt will lower your overall balance and make you look less risky to lenders. It also improves your credit utilization ratio (the amount of credit you’re using compared to your overall limit). A lower ratio makes you look more reliable to lenders.

  3.  Don’t Apply for Too Many Credit Cards

You might think that opening a bunch of credit cards will boost your credit score, and it’s even more tempting when some businesses offer extra discounts to apply for their card (It’s ok - we’ve all been there!), but it’s better to resist. Too many credit applications can lead to hard inquiries on your report, which can temporarily ding your score.

 

In Conclusion

So if you’re thinking of buying a home, remember that your credit score plays a crucial role. Don’t worry if it’s not so perfect – you have options. Finding the right lender is important. Our agents here at Emmer Real Estate Group have a list of trusted lenders that we work with.  Contact us today at 262.629.4747 and we’ll get you connected!