If you’re thinking about buying a home, you’ve probably heard a lot about credit scores. They can feel overwhelming, but the truth is—they’re more manageable than you might think
And no, you don’t need a perfect credit score to become a homeowner!
How Much Do You Really Need to Know About Credit Scores?
According to Fannie Mae, only 32% of potential homebuyers truly understand what lenders look for in a credit score. That means most buyers overestimate the minimum score needed to qualify for a home loan.
So, let’s break it down.
What Is a Credit Score?
Your credit score is a three-digit number that reflects your credit history and financial reliability. Lenders use it to assess your risk level when approving a loan and setting interest rates.
The score is based on factors like:
✔️ Paying bills on time
✔️ The amount of debt you carry
✔️ Your history of credit usage
Generally, a higher credit score means you’re seen as a lower risk to lenders, but don’t let that discourage you if yours isn’t perfect—because it doesn’t have to be!
What Credit Score Do You Need to Buy a Home?
There’s a common misconception that you need a high credit score to buy a home, but that’s simply not true. Minimum credit score requirements vary depending on the type of loan you’re applying for. So even if your score isn’t where you want it to be, you might still qualify for a mortgage.
Want to Improve Your Score? Here’s How:
If you want to boost your credit score before applying for a loan (and potentially secure better terms), here are three simple steps to help:
1️⃣ Pay your bills on time – This is one of the fastest ways to show lenders you’re financially responsible. Even small, on-time payments can make a big difference.
2️⃣ Pay down outstanding debt – Take a look at your balances and work on reducing them. Lowering your credit utilization can improve your score significantly.
3️⃣ Hold off on applying for new credit – Opening new credit cards or loans can temporarily lower your score. Instead, focus on improving your existing accounts.
Not Sure Where You Stand? Let’s Talk!
If you’re unsure about your credit score or where to start, the best thing you can do is talk to a trusted professional. Whether you’re buying your first home or your next home.