Is Your Credit Keeping You From Buying a Home? You’re Not Alone.

By Steven Shaw on 5/29/2015

Mortgages

Is Your Credit Keeping You From Buying a Home? You’re Not Alone

Advertiser Disclosure Comments 0 Comments

For most of us, buying a home is both exciting and scary. It’s a big purchase, often financed for many years, and no one wants to make a mistake. But many homebuyers are delaying the big jump into homeownership because of one thing — their credit scores.

A new survey from Experian found that 58% of future homebuyers are actively working on their credit in order to get a better mortgage interest rate. The actions they were taking included paying off debt, paying bills on time, keeping balances low and not applying for new credit. All of those can boost credit scores, particularly paying on time. A late payment when you are applying for a mortgage can really hurt your chances of having the loan approved.

The key to feeling prepared for buying a home was credit knowledge, with about 70% of consumers who knew their score saying they felt prepared to buy a home, versus 54% of those who did not.

“No one likes to go into a lender’s office, whether buying or refinancing, and not know the state of their credit; it makes them feel helpless,” said Becky Frost, senior manager of consumer education at Experian Consumer Services, said in a news release.

Of the home shoppers (or refinancers) who don’t know their scores, almost half (48%) were worried that their scores might not be high enough to qualify for the best rates. Credit scores shouldn’t be a mystery, particularly for people who are about to purchase a home. You can get free annual credit reports from each major bureau at AnnualCreditReport.com. You can also get two free credit scores, updated every 30 days, for free on Credit.com.

Once you understand what that three-digit number means in terms of your perceived creditworthiness, you can get a handle on what mortgage rates you might be able to qualify for. Your interest rate can make a major impact on how much house you can afford — you can take a look at this home affordability calculator to get an idea of where you stand.

The survey, produced by Edelman Berland, was conducted online April 7-14. Five hundred buyers (250 recent and 250 future buyers) were surveyed, and the overall margin of error was 4.4%.

More on Mortgages & Homebuying:

Image: iStock

Sign up for our weekly newsletter.

Get the latest tips & advice from our team of 50+ credit & money experts, delivered to you via email each week. Sign up now.

Gerri Detweiler is Credit.com's Director of Consumer Education. She focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com. More by Gerri Detweiler

credit report
credit score
Home Loan
Mortgage
Author