Taking time to pay down other debt first
A recent survey by Experian, a global information services company, showed that 34% of future homebuyers think their credit score could hurt their chance of owning a home.
What’s more, 45% even delayed purchasing a home in order to better work on improving their credit score.
“Your credit profile is one of the factors that can have a substantial impact on securing a home loan because it is used by lenders as an indicator of your financial health,” said Rod Griffin, Experian director of public education. “Consumers planning to purchase a home should check their credit scores and reports to see where they stand. From there they can develop a financial plan so they are in the best place to try to secure the loan they desire.”
Although they may be delaying the purchase of their home, many of these future homebuyers are taking an active role in improving their credit score.
Nearly 70% of the respondents stated they are paying their bills on time and 60% are paying off debt. Another 28% if future homebuyers are also keeping balances low on credit cards and 15% are protecting their credit information from identity theft and fraud.
“It is important to take steps early in the home-buying process to allow time to make changes and have those changes be reflected on your credit score,” Griffin said.
Of those looking to delay the purchase of their home, about 20% reported they were likely to either opt out of the loan process or delay purchasing a home for another five to 10 years. Also, about 45% of respondents said they were delaying to secure better interest rates.
The survey also found that 35% of future buyers said they don’t know what steps to take to qualify for a greater loan amount. Nearly a third of respondents said they would buy a more expensive home if they had better credit and a larger loan amount.