If you’re looking to purchase a home for the first time, or you’re getting ready to settle into your home for the long run, it’s essential to have a high credit score. Wondering what score you need to purchase the house of your dreams? Read on for all you need to know.
Why is Your Credit Score Important?
According to a Dallas credit repair analyst, when looking to purchase a house, you will also shop around for a mortgage or home loan. This loan provides you with the money you’ll need to purchase your home. Mortgages allow you to place a down payment and pay the remainder back over twenty or thirty years.
Your credit score tells lending agencies how risky it is to offer you a home loan. All agencies must weigh the risk they take when deciding how much they are willing to provide you, and at what interest rate.
What Credit Score Do You Need?
Credit scores fall into a few categories ranging from bad to excellent. The numbers break down like this:
300-560 = Very Bad
561-650 = Bad
651-700 = Fair
701-750 = Good
751-850 = Excellent
The higher your score, the more confident lending agencies can feel in offering you a home loan. Many lenders deny applicants with scores below 650.
If you fall within the “excellent” range, you’ll not only qualify for a mortgage, but you’ll be able to score the best long-term interest rates, as well.
Those with “good” scores shouldn’t experience any application problems, but you’ll start experiencing slightly higher interest rates.
“Fair” credit score owners will find that some lending agencies are wary. At this point, you’ll likely be required to put a larger down payment on your house, in addition to paying higher interest rates for the loan.
“Bad” and “very bad” credit owners might find themselves unable to find a lending agency willing to take them. If you can secure a loan with this credit score, your interest rate will be extremely high.
How to Improve Your Credit Score
If you need to bump up your credit score to get it in range for your preferred loan application, there are several things you can do.
First, and most important, pay all bills on time. Try to pay more than the minimum if possible, but pay at least that much every month. When you skip or miss a payment, your credit score goes down.
Second, use less credit than you have available. If you’re using all your available credit, your score will be impacted negatively. Ideally, only use 30% of your maximum credit allowance. For example, if you have $1,000 in available credit, only use $300 at any given time.
Finally, pay outstanding debt down. The more debt you accumulate, the harder it will be to pay it off. Pay off outstanding debt regularly, and your score will improve.
Purchase the Home of Your Dreams
Your credit score is vital if you want to qualify for a mortgage that allows you to purchase the home of your dreams. While you may be able to get a loan with a lower score, you won’t secure the best interest rates possible. For the ideal situation, apply for a mortgage when your score is in the “good” and “very good” ranges. Are you ready to fill out an application?