According to a TransUnion survey, many Americans are confused about their credit. They surveyed 1,000 consumers ages 18 to 64 from February 2, 2015 to February 5, 2015. The survey showed that, of those surveyed, there was a lot of misinformation about credit. Today, let’s look at the credit process and how it will impact purchasing a home.
In the TransUnion survey, 48% of people believed that an increase in income improved their credit score. Other people falsely believed that rental payments were included in their report. 49.5% believed their full employment history was included in their reports. Additionally, 47% of people believed that regular payment of cellphone bills are included in their report.
These are just a few of the misconceptions that the surveyed Americans age 10 to 64 have. As the TransUnion survey points out, regular payments of rent and cellphone bills aren’t regularly reported. More often it is the inability to make payment, when a debt is put into collections that will be reported.
Credit checks during the home buying process looks at the amount of debt you hold, your risk of not repaying on a loan, as well as your financial resources to pay back on your mortgage. During the home buying process, your credit will impact the amount you can borrow for a home, the interest rate on your mortgage as well as the mortgage lending terms. During the three months prior to filling out a mortgage application, it is important to check your credit score. This gives you time to correct any potentially fraudulent activity like identity theft that may appear on your report. A three month time frame can also help you rectify old, unpaid credit card debt that could negatively impact your application.
Understanding your credit is just the first step in the home buying process. This will give you an idea of what financial condition you are in. You then can begin to research mortgages, brokers and rates. Remember, don’t ask to borrow more than you can actually afford. This could have damaging repercussions in the long term. If you are in the home buying process, I’d be happy to show you homes in the Encinitas, California area.