John Vaughan (Financial Advisor) @ Lucid Living
By now, most buyers are well aware of the importance of credit to their home-buying plans. What they may not be aware of, however, is the truth behind some common credit myths.
Myth: Those who have paid their bills and have never defaulted on a loan, home loan or credit card bill need not worry about their credit report or credit score.
Truth: Many factors influence a credit score, and payment history is just one of them. When calculating a credit score, credit bureaus also consider length of credit history, types of credit used and ratio of credit available to credit used. Even if one’s payment history is good, scoring lower on one of the other factors could lower the overall credit score.
Myth: Those who know their credit score do not need to look at their credit report before applying for a home loan.
Truth: A lender will certainly look at a credit report, so know what’s on it before they do. Errors may occur on a credit report (see our article: 88% Of Credit Bureau Information Is Incorrect) , and if there are any negative marks on one’s credit history, it’s important to know about them – and address them (see our article: Correcting Credit Report Errors) – before a lender asks.
Myth: Checking one’s credit score is a hassle, and it can’t really be helpful in the long run when managing one’s credit.
Truth: You can access your credit score and credit report INSTANTLY via our website. Keep in mind that lenders use a variety of scores when evaluating credit worthiness, and the one obtained online may vary from what a lender might see. Still, any score can be a valuable educational tool to better understand how lenders view one’s credit. Get EXPERT ADVICE from our credit managers on how a credit score is calculated, which factors impact it and the best time to apply for credit.
Myth: Those who don’t have perfect credit will not be able to get a home loan.
Truth: Lenders are more strict than they’ve been in the past and a good credit score and report can certainly make someone a more appealing prospect to them. However, a credit score in the lower range doesn’t make it impossible to get a home loan. But a higher credit score is likely to net you more options — and better terms.
Home prices and interest rates are still low across the country, making it a good time to buy a house, real estate experts say. Knowing the truth behind some common credit myths — and understanding one’s own credit history and credit score — makes it easier to take advantage of the many opportunities still available for home buyers.