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Email Post to a Friend: What Are Credit Scores and Why Do They Matter for Home Buyers?

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From an early age, we are graded on academic performance, athletic ability, and so much more. But that doesn't stop as we get older. 

Upon entering the "real world," we would quickly receive a new kind of grade, one that ranks our financial capability, called the credit score. 

This grade would be reevaluated constantly and play a role in many of life's most important moments - including the home buying process. 

Let's take a deeper look at credit scores and why they matter for home buyers. 

What are they?

Credit scores were designed to answer questions like "How likely are you to repay debt?" and "How trustworthy are you with your finances?". They sit on a range of anywhere from 300-800, and the higher, the better. A higher score indicates that the consumer is less risky and can be trusted when borrowing money. 

What determines your score?

Your credit score is dependent on five core components. According to the JECD, they are…

1) Payment History measures how well you have repaid debt in the past.

2) Balances Owed measures how much debt you have in comparison to existing credit limits.

3) Length of Credit History measures how long you have been using credit.

4) New Accounts measure your use and pursuit of new credit.

5) Types of Credit measures your mix of credit and experience using different types of it.

Why does it matter for homebuyers?

The answer here is simple! A lender's decision to grant you a home loan is largely influenced by your credit score. In fact, when you apply, it's one of the first things they'll look at! The right score will not only increase your chances of scoring the loan but a better interest rate too. 

What score is needed to buy a home?

While credit score requirements vary depending on loan type, the minimum for mortgages generally sits in the 620 range. 

If your score is lower than that, you may want to look into an FHA Loan. This type of loan is insured by the Federal Housing Association and requires a score of 580. 

Veterans, qualified service members, and spouses can also apply for a VA Loan, which also tends to sit in the 580 region. 

What should be avoided when applying for a mortgage? 

In order to ensure the best possible outcome, there are a few things you should avoid during the application process.

1) Opening new credit cards

2) Closing credit cards

3) Applying for new loans

4) Cosigning on new loans

How can you improve your score?

Buying a home with a low credit score is possible, but just means you'll be paying more on your mortgage for the time you have that loan. Here are some rapid-fire tips for raising your score. 

1) Pay your bills on time.

2) Set up autopay, so you never miss a payment.

3) Don't spend over your credit limit. 

4) Work towards paying off your debt.

5) Diversify your credit mix.

There are plenty of things to think about when it comes to the home buying process, but we hope credit scores make a little more sense after reading this. 

The Masiello Group is a second-generation family company that has been a trailblazer in New England real estate since 1966. With now more than 35 offices throughout northern New England, we're the largest residential real estate firm north of Boston to offer a complete suite of home services, including buying, selling, mortgage, title, insurance, relocation, and more. 

Our agents are eager and excited to meet your real estate needs! 

For real estate insight, market trends, and more, check out our weekly blog at

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