When Buying a Home, Having Good Credit is Crucial

Buying a home is one of the most important decisions you will ever make, and it's also one of the largest investments that you'll ever make. One piece of advice that I give to people who are looking to buy their first home is to make sure they have good credit. Your credit score isn't just for borrowing money; it's something lenders take into account when deciding whether or not you're eligible for a loan. It can even affect your interest rate!

If you have bad credit, it's very likely that your interest rate will be higher than someone who has good credit. You should also keep in mind the fact that if you're planning on buying a house with another person (e.g., your spouse), then their credit score is just as important for getting approved for the loan! If both of you have bad credit, then there's a good chance that your lender will not approve the loan.

Now, I'm not saying that it's impossible to get approved for a loan if you have bad credit. But keep in mind that your interest rate will likely be higher, and this could make your monthly mortgage payment more expensive! When looking at the numbers involved with buying a home (i.e., taxes, insurance), even just an extra $50 per month can make a big difference!

Bad credit will likely increase your interest rate on the loan and could even cause you to be denied altogether. This can have major implications for what type of monthly mortgage payment you'll end up with as well as how much money you're going to end up paying in total throughout the course of your loan.

Having good credit can help you save money when buying a home, and that's something I tell people every chance I get!

To get started, you'll want to check your credit report for any inaccuracies. Errors on a credit report can cause the score to be lower than it should be. Checking one's own credit is important because there are laws protecting consumers from identity theft and fraud which make sure that only accurate information is reported about an individual consumer. Some of the most common credit agencies are TransUnion, Equifax, and Experian.

When checking your own credit report you should be prepared to see a list of all the places where you have opened accounts for things like banks or stores with an account number and address associated with it which is what creditors use when they pull someone's information from the agency. Another item that you may see is a list of accounts which have been charged off or closed with an explanation as to why. These can be things like a paid cell phone bill, a credit card account which was no longer used so it was closed but the balance owed wasn't settled yet or perhaps even bankruptcy filings made against you by other creditors.

While these things may seem like a black mark on your credit report, consider the fact that they are probably part of what is holding you back from getting approved for loans and accounts with other lenders. When considering paying off some or all of those items to remove them from your history it's important to understand how doing so can affect your score in a negative way despite knowing that those items are accurate as well. It's a common misconception with the idea of improving your credit score by paying off past due balances or other derogatory marks on your report that it will automatically cause things to be better from then onwards, but what you may find is that even though some or all of these accounts might show up as paid in full, the creditor may still report them as settled for less than the balance due which can lower your score.