In the Market to Buy a New Home? How Well Do You Know Your Credit?

The kids have all recently gone back to school and we are already stunned by what they’re learning. The Van Allen belt? Subjunctive clauses? Quadratic equations? Oh, how I wish we could all soak up such new knowledge so efficiently!

Most of us grownups are on a new learning curve, too. Whether we like it or not, or think we need it or not, the upheaval of our economy is giving us a crash course in credit management. And, the more you know, the more comfortable you will be that you are making the right decisions when it comes to your credit and buying a new home.

So, how well do you know your credit? As a Realtor, I can tell you that when it comes to buying a home, good credit is the most valuable asset you can own. Always keep in mind your credit determines how much you’ll pay on your next loan.  Those with excellent credit will, of course, get the best rates possible because they are less risky for lenders. So, how much difference can that make for someone with a lesser credit rating? Well, those with the better credit rating are paying 3 ½ percentage points lower than those with lower credit ratings. Here’s an example: On a $250,000 mortgage, those with top credit will pay $588 less each month than those with low credit. That’s an impressive $7,056 a year savings.

When buying a home, you will always run into the traditional questions such as how much you earn annually, how much you have in savings, and how long you’ve been at your current job. All will have a bearing on your ability to keep up with your payments. But, the biggest factor you will encounter is your credit score. Your score rating reflects how promptly you’ve paid bills, how long a track record you have as a credit user, how much you owe, what type of credit you have, and all new credit activity.

Some great ways to manage and re-establish your credit is to look for foolproof ways to pay off your debts in a timely fashion and be sure to take advantage of your once a year free credit report. Or, you can always use a credit monitoring agency. They are inexpensive and you can get online to see your credit score and anything else going on with your credit anytime.

A home is a valuable asset to anyone, but you can’t get your dream home without credit. So, keep an eye on your credit score as often as you can.