Credit can be confusing, but it can also be a huge asset going into the home-buying process. A good credit score increases the likelihood of qualifying for a mortgage because it indicates to the lender that you’re more likely to make timely payments on your loan. Even better, a solid credit score gives you, the potential borrower, a better chance at a lower interest rate. This might result in thousands of dollars saved over the life of the loan.
But if you’re finding that your credit score is more of a hindrance than an asset to your home-buying endeavors, or are unsure where you stand with your credit health, never fear. There are methods to improve and maintain your credit as you move toward buying a home.
It's good practice to check your credit report and credit score to see where you stand before applying for a loan. However, the credit score you see is unlikely to be the same one the lender uses when making a decision on your creditworthiness. Both scores likely are accurate, but lenders use specialized scores calculated differently depending on the type of loan.
Mortgage lenders use a different credit scoring model than consumers have access to. Over 90% of mortgage lenders use FICO, a score created by Fair Isaac and Company from all three credit bureaus – Trans Union, Equifax, and Experian. . Most consumer credit scores use the Vantage 3.0 scoring model.