Soon-to-be homeowners aren’t especially concerned about low inventory levels, though. The low they’re worried about is their credit scores and whether they will prevent them from obtaining the appropriate financing, a new survey suggests.
A considerable percentage of millennials – who range between 18 and 35 years of age – are anxious about the loan approval process and their abilities to obtain the mortgages they need to buy, based on the results of a poll done by TransUnion. Nearly 50% of respondents in the survey said low credit was what had them the most worried.
Ken Chaplin, TransUnion’s senior vice president, noted why maintaining a good credit score is so important.
“Credit scores are a crucial component of the home buying process, impacting everything from the size of a mortgage payment to the interest rate on a home loan,” Chaplin explained. “People with subprime credit may face financial barriers to homeownership, making it difficult for their dream home to become a reality.”
For the most part, Americans have a pretty good understanding of how the financial decisions they make can affect their credit health. In a separate poll conducted by Equifax, virtually everyone correctly cited paying bills on time as one of the factors that played a role.
Maintaining a good credit profile can really pay off – literally.
At the same time, though, some consumers have some misconceptions about the ways in which credit scores are determined. For example, more than 55% incorrectly identified being denied credit as one of the factors that influenced their creditworthiness, the Equifax survey revealed. Additionally, 30% believed that even checking their credit reports had an impact.
Checking your credit is a healthy habit
To the contrary, consumers who check their credit reports out are doing themselves a lot of good, stressed Diane Moogalian, vice president of operations at Equifax.
“Reviewing your credit report regularly is a great first step when it comes to improving financial literacy,” Moogalian advised. “Getting into this healthy financial habit may provide consumers with insight into factors that may need to be addressed and could possibly help one address identity theft.”
Consumer finance experts note that there’s really no hard-and-fast rule as to how often you should check your credit report. Ideally, it should be done at least once per year. In fact, as a consumer, you’re entitled to one free credit report annually from each of the three credit agencies, those being TransUnion, Equifax and Experian.
How you can strengthen your score
Regarding what you can do to improve your creditworthiness when you’re in the market to buy a house, Chaplin recommends checking your credit report before you apply for a mortgage, ideally three months prior to filling out the necessary paperwork. If your FICO score is less than 700, some simple ways of strengthening it include paying off your bills prior to the due date, only opening new accounts you intend to use and maintaining a low credit utilization ratio.
“The home buying process begins well before you start looking for real estate,” Chaplin said. “A credit score, which significantly impacts the home financing process, is built on good spending habits and a pattern of responsible borrowing established over a lifetime.”
Article from Selective Insurance Company.