{"id":56481,"date":"2025-01-29T23:29:54","date_gmt":"2025-01-29T23:29:54","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/real-estate\/how-your-credit-score-impacts-your-ability-to-buy-a-house\/"},"modified":"2025-01-29T23:29:54","modified_gmt":"2025-01-29T23:29:54","slug":"how-your-credit-score-impacts-your-ability-to-buy-a-house","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=56481","title":{"rendered":"How Your Credit Score Impacts Your Ability To Buy A House"},"content":{"rendered":"


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How Does Your Credit Score Impact Your Ability To Buy A House?<\/figcaption><\/figure>\n<\/div>\n

Buying a house can be a daunting time for everyone involved. Whether you\u2019ve found your dream home yet or not, just the very thought of owning your own home is terrifying and exciting all at once.<\/p>\n

If you\u2019ve been living with your parents or renting for years, you will finally have a place to call your own. It will be freedom unlike any other. Paint the walls whatever color you want, leave your dishes in the sink, put the lounge in the corner of the room instead of the center. The options are endless.<\/p>\n

But, with all of that excitement comes some serious financial responsibility, which is why you need to exhaust all options when it comes to financing. For most people, this means going through a bank and getting a mortgage, but to do so, you need to understand that the bank isn\u2019t going to give money to just anyone.<\/p>\n

When it comes to getting approved for a mortgage<\/a>, one of the first things they will do is perform a credit check. This will play a large part in their determination of whether or not you are eligible for funding and if your credit check isn\u2019t up to scratch, your chances of a home loan are minimal.<\/p>\n

As Darren Robertson from Northern Virginia Home Pro<\/a> says, \u201cBuying a home is a huge decision and, as well as being exciting, it can be a very stressful time. This stress can be greatly eased by getting your credit score in check before shopping around, to avoid huge disappointments when you find the right property.\u201d<\/em><\/p>\n

So, what constitutes a good enough credit score to buy a house?<\/p>\n

What is a credit score?<\/strong><\/h2>\n

A credit score is a three-digit number between 300 and 700 that is calculated by companies like Equifax<\/a>. Essentially, it is a numerical representation of your financial history and current financial health. Your credit score is calculated by an assessment of your finances throughout your life, including your payment history, your used and available credit, how long you have been using credit, public records, and inquiries into your credit file.<\/p>\n

What\u2019s good, bad, and average in a credit score?<\/strong><\/h2>\n

So, what\u2019s considered to be a good credit score<\/a>, a bad one, or an average one? Find out below what typically constitutes for each!<\/p>\n

Good<\/strong><\/h3>\n

A credit score of 600-700+ is considered a \u2018good\u2019 credit score. This will enable you to obtain a loan more quickly and easily than someone with an \u2018average\u2019 or \u2018bad\u2019 credit score. This can mean lower processing fees, lower deposits, and lower interest rates. All good things if you\u2019re looking for a mortgage. If your credit score is up around this figure, you\u2019re doing something right.<\/p>\n

Average<\/strong><\/h3>\n

A credit score of around 550 is considered an \u2018average\u2019 credit score. Most people will have a credit score that ranges around this number, which may mean you\u2019ll still receive some financial benefits from the bank when you go to apply for your mortgage. But it also means they won\u2019t be as good as those with higher credit scores. It might not be ideal, but it\u2019s not a disaster.<\/p>\n

Bad<\/strong><\/h3>\n

A credit score of around 300-400 is considered a \u2018bad\u2019 credit score and will likely negatively impact your financial prospects when buying a home. One important thing to note is that having a bad credit score doesn\u2019t necessarily<\/a> disqualify you from financing. You might qualify instead for a \u2018bad-credit mortgage\u2019, with higher processing fees, higher interest rates, and higher deposits.<\/p>\n

How does it factor into a bank\u2019s decision?<\/strong><\/h2>\n

Banks take calculated risks with their clients when they offer to finance their home via a mortgage<\/a>. Having an average or good credit score will be more positively received by a lender than having a bad credit score, obviously. However, banks may still take a chance, but it\u2019s a risk on their part if you default on your mortgage.<\/p>\n

What constitutes \u2018good enough\u2019?<\/strong><\/h2>\n

Usually, for most financial institutions that lend you money, credit scores that are ~550 and above are considered good enough to qualify for traditional home mortgages. So, if you\u2019re thinking of applying for a loan, try and make sure your credit score sits somewhere around 550 or above.<\/p>\n

How can you raise your credit score if it is insufficient?<\/strong><\/h2>\n
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Are You Able To Raise Your Credit Score If It\u2019s Too Low? | How A Credit Score Impacts Buying A house<\/figcaption><\/figure>\n<\/div>\n

Let\u2019s say your credit score is currently insufficient to qualify for a loan, and that your bank has turned you down. What are some ways you can raise that credit score so you can get that much-needed loan?<\/p>\n

Review your current credit score reports<\/strong><\/h3>\n

The best chance you have of improving your credit score is to firstly ascertain what you\u2019re working with. You can request a copy of your credit report from each of the major national credit bureaus: Experian, Equifax and TransUnion. Even better, you can do this for free once a year via the Annual Credit Report website.<\/p>\n

From these reports, you can see exactly what is helping or hurting your credit score. Factors that contribute to higher scores include low balances on credit cards, a history of on-time repayments, holding a mixture of credit cards, loan accounts and having made minimal new credit inquiries. Conversely, late or missed payments, collections and judgements, high credit card balances are major credit score damagers.<\/p>\n

Prioritize on-time repayments<\/strong><\/h3>\n

Over 90% of top lenders use FICO credit scores, which are comprised of five factors:<\/p>\n