Home Buying Roadblocks – Credit


Filed under: Financial Planning


In today’s video, I’m continuing to discuss the topic of roadblocks and the common things that are stopping people from homeownership. One of the biggest issues is credit. Your credit score is really important when it comes to getting qualified for a mortgage. Even if the credit score isn’t a roadblock, it can affect the rates that you receive on the mortgage.

Credit is Mysterious

Are you one of those people who is always watching your credit on these credit service websites? It is good to be aware of your score, but it can be tricky to predict how your credit score will change over time. Keep in mind that the score you are seeing is usually not a true FICO score. There are several FICO algorithms that can affect the score that will be used when applying for a mortgage.

These online services are great for understanding the overall progress with your credit score. You will be able to notice quickly if something negative shows up since you can see the change in the score.

Start Watching Your Credit

If you are preparing to buy a home within the next year, then you need to start watching your credit. Good credit will save you a lot of money because you can qualify for lower interest rates. Too often, I talk to clients who are in the dark about their credit… they don’t know their current score or steps that can be taken to improve that score.

You can look at online services or talk to us for more information. We’ll gladly pull your credit score and help you determine where you are and the steps that need to be taken, so you are ready to qualify for a mortgage when it’s needed. If there are issues, time is the key to help you improve your credit profile.

Improving Your Credit Score

Here are the three main criteria that will affect your credit score:

  • Pay History: Consistency with on-time payments
  • Utilization of Credit: Aim to use less than 25% – 50% of the credit that’s available
  • Longevity of the Accounts: Keep the accounts active, even if you need to use the account to pay for groceries or gas.

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