Why To Check Your Credit Before Buying A Home

Your credit score helps determine the rate and conditions you receive on a loan.

If your credit score is high, meaning that your credit history indicates that you’ve paid your credit card bills on time, haven’t “maxed out” your credit cards, etc., then lenders believe it’s a fairly good bet that you won’t have difficulty paying off your loan.

They will see you as a low-risk investment and offer you a low rate on your loan with good conditions.

If your score is lower, lenders will think you’re a riskier investment, and charge you (by loaning you money at a higher interest rate, often including hidden charges) to take on the perceived risk. 

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How Do Credit Scores Affect You When Applying For A Loan?

Most lenders have a baseline credit score by which they largely make their decision to approve or deny mortgage applicants.

The maximum credit score is 850 (though a score of 850 is rare, indeed. Only about 10% of applicants have a score over 800).

Any score in the 700s or above is excellent and can often get you a loan with the lowest interest rate.

When you get into the 600s it starts getting dicey. A score of 680, for example, is still considered good, but when you get below 660, some lenders start saying, “No.”

For others, 640 or 620 is the line at which you won’t be considered for their better programs.

Once you get into the 500s, you are a candidate only for what the industry calls subprime loans, those with interest rates that are a couple of percentage points higher than those offered to prime borrowers. Subprime loans also often come with a lot of hidden charges.

So you can see the importance of keeping a good score.

The Good News About Your Credit Score

Your credit score isn’t fixed in stone.

If you have bad credit scores, there are ways to improve your credit health.

If you find your scores are lower than you expected, you’ll need to engage in credit rehab. This is different from credit repair, defined as going to an outside company that promises to cure your problems and raise your scores.

There may be some good ones out there (along with some disreputable ones) but they can’t do anything you can’t do yourself and you shouldn’t waste your time or money going to them for help.

From a financial standpoint, it is almost always better to take the time to improve your credit health, and make yourself eligible for a better interest rate, than it is to apply for a loan with a credit score that will only make you eligible for a subprime loan.

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If your debt has become unmanageable and you have difficulty making your debt payments each month, then you should consider a FREE consultation call with one of our certified Debt Consultants, who can provide personalized debt relief advice tailored to your specific needs.

By taking proactive steps today, you can put an end to your financial stress and work towards a brighter financial future. 

Remember, there is always hope for debt relief, and our team of experienced professionals are ready to guide you on your journey to regaining control of your finances.

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