How Credit Checks Affect Buying a Home
Your credit score significantly affects the outcome of your home loan application. There are ways to check your score without dinging your credit score.
You probably know that your credit score is something that all mortgage companies will look at when you apply for a loan. But, how does your credit score and credit checking actually affect buying a home? Here are a few of the basic things to know before you apply for a mortgage.
Why Do Lenders Look at Credit Scores?
Lenders will request access to your credit score because it’s an indication of how well you’ll pay back a loan. It tracks all sorts of factors related to your history of paying back credit cards and debt.
What’s an Acceptable Credit Score?
- < 630 = Low Credit
You might have a credit score of 630 or less if you’ve had issues with bankruptcy, a history of missed payments or if you don’t have any credit history.
- 630 – 689 = Fair Credit
This is an average credit score. It tells the lender that you do not have too much bad debt. You might want to consider paying down credit cards and/or ensure you’re always paying your debts on time.
- 690 – 719 = Good Credit
You will be an ideal candidate for most loans and shouldn’t worry about being penalized for your credit score.
- 720 – 850 = Excellent Credit
You will get the best rates available as a reward for paying down your debts on time and not having any history of issues.
How Does Checking My Credit Score Affect My Score?
There are two types of inquiries — soft and hard. Hard inquiries are the only type that affect your credit score.
When you apply for credit, a lender or credit card company checks your credit score, which is considered a hard inquiry. A hard inquiry will typically lower your credit score by a few points and will stay on your credit report for two years.
Soft inquiries, like when a person or company checks for your credit score, should not affect your score.
How Does My Score Affect Getting a Home?
Most mortgage companies will look at your credit as a way to determine your interest rate and the types of products available to you. The better your score the lower the interest rate and the more product options you will have. Knowing your credit score and ensuring there aren’t any outstanding issues associated with it, could end up saving you thousands when applying for a mortgage.
You are eligible for a free credit report each year, so before you apply for a mortgage check first to see if there are any issues or disputes that need to be addressed.
And, as always, when you find that perfect home — don't forget the Union Plus Real Estate Rewards and the Union Plus Mortgage Program to help you with your home buying process.