If you are looking for a home you probably hear a lot about your credit. Good scores, bad scores, revolving accounts—why is it so important in the homebuying process? Your credit score and report impacts the type of credit terms you will receive. For example, a lower score or derogatory report may result in higher interest rates, which could mean you pay more in the long run.
First, your credit score and credit report are two different things. Your credit score is a 3-digit number generated by an algorithm that uses information in your credit report. Your credit report is a document that contains your personal information (such as name, birthday, and social security number) as well as your credit history (open and closed accounts, inquiries, adverse actions, and other factors).
You can view your credit score on free websites or sometimes your credit card company will provide a free credit score as part of your membership. And under federal law, everyone is entitled to 1 free credit report a year.
Next, check out your scores and reports to see where you stand. Credit scores can range between 300-850, with higher numbers representing better credit. While reviewing your credit report, make sure to check for inaccuracies and report them as soon as possible. It can take up to 90 days to correct an error, so the sooner you report them the better.
Lastly, whether you’re looking to purchase a home in the near future or you’re already in the homebuying process, help your credit help you. Don’t open new accounts or skip payments. Continue to pay down any balances and keep an eye out for any instances of fraud or inaccuracies.
Want to know more about credit, homebuying 101 or how to begin your journey home? Contact one of our home loan experts to get started today!