Knowing your credit score before you start shopping for a house could make you feel more confident about the homebuying process, according to a survey commissioned by Experian. The online survey of 500 potential homebuyers and those who purchased homes in the last year, found that a mere 5 percent of the respondents were not aware of the important role their credit scores played in the homebuying process.
According to Becky Frost, senior manager of consumer education at Experian Consumer Services: “Our survey shows when people interact with their credit by tracking it and learning more about the factors that affect it, they feel more confident about their purchasing power.”
Know your credit score
While 54 percent of those who did not know their credit score felt that they were prepared to buy, as many as 70 percent of those who did know their credit score felt prepared. Of those looking to refinance, which means they have been through the mortgage process in the past, a hefty 62 percent understand that good credit scores help them snag a better interest rate.
Credit score blues
Of the prospective buyers, as many as 41 percent felt apprehensive that their credit score wouldn’t qualify them for the best rates. And 27 percent of this group did not know their credit score. A higher percentage, at 48 percent, of those who did not know their credit score felt concerned that their credit scores could impede their ability to obtain a home mortgage.
Working on it
Fifty-eight percent of the future homebuyers are proactively working on their credit scores to snag better interest rates. They engage in activities such as paying off their debt, being prompt with bill payments, maintaining low balances on their credit cards, being watchful about identity theft and not opening new credit accounts.
However, a hefty 35 percent of the future homebuyers say that they don’t know what to do to qualify for a bigger loan. These people, too, would be served by engaging in activities similar to those undertaken by those who are being more proactive.
As many as 23 percent of recent homebuyers didn’t check their credit score at any point in the homebuying process. Of the other 77 percent, or 192 buyers, who did check, 21 percent found that their credit score was lower than they expected, while 14 percent found something negative in their report. That’s why it helps to be aware of your credit score early, before you start your homebuying process, so you rectify any negative input.
Another 43 percent found that their credit score was higher than they expected, which likely boosted their confidence about getting a better interest rate.
Impact of Identity fraud
If someone has appropriated your identity and engaged in fraud, it could hinder your credit prospects. However, the survey respondents were less savvy about the impact of identity theft. While 74 percent felt that they would find it difficult to get a good interest rate as a result of poor credit, only 61 percent felt that they would be impeded by identity theft. Respondents were also more aware that they might need a co-signer as a result of poor credit.