Checking Your Credit Before Purchasing A Home

Before purchasing a home you need to meet with a lender to see about qualifying for a loan. Lenders will use your credit score from your credit report to see if you are a responsible borrower and therefore if you qualify for a loan with them. Credit reports are put together by three separate agencies, Equifax, Experian, and TransUnion.  Each of these agencies puts together information from your credit history and, using a formula put together by the Fair Isaac Corporation (FICO), determines your credit score. Each of your scores will be slightly different and lenders usually use your middle score when analyzing your credit history.

Your credit score is used to determine the rates and conditions of your loan. If you have a higher credit score,  lenders see you as a low risk investment meaning that you probably won’t have difficulty paying back the loan and they will offer you a lower rate with good conditions. If your score is on the lower side, lenders may see you as a high risk investment and may offer you a loan with a higher interest rate. The maximum score is 850, although anything over 800 is pretty rare (only about 10% of applicants have a score above 800), any score in the 700’s or higher is considered excellent and will usually get you a lower rate, and anything in the 600’s can get a little more complicated. A score of 680 is still considered good but if your score falls below 660 some lenders may start denying you a loan.

If your credit score is on the low side or lower than you expected-don’t worry too much. Your credit score changes over time and there are several ways to improve it such as making all of your payments on time and paying down existing debt. To know your numbers, you can head over to Credit.com and use their free Credit Report Card every month to see where you stand.