Your credit score and profile play a key role in determining if you qualify for a mortgage, and it’s a good idea to check your credit prior to starting your search for a home.
Thanks to the Fair Credit Reporting Act, you can get your credit report from each of the primary credit bureaus once every 12 months for free. More information is available at the Federal Trade Commission website.
Your credit report includes your current and some past credit obligations, if you paid those obligations in a timely manner, and both your outstanding and available credit. Your credit report also includes your credit score, which is derived from your payment history and how you access your available credit.
Just keep in mind that even with an excellent credit score you may not be able to get approved for a mortgage if your outstanding monthly payments on debt are too high in comparison to your monthly income. This is known as your debt-to-income ratio, and most mortgage lenders want it to be at 43% or less.
If you don't have a good credit score, you may still be able to purchase a home, but you will have fewer financing options and the cost of that financing will be higher. That’s why most mortgage lenders recommend you repair your credit prior to purchasing a home.
There are reputable credit counseling services that can help you understand what steps to take to improve your score (since it’s not always as simple as paying off debt), to make it easier to qualify for and obtain more favorable financing terms for your mortgage that will save you money.
The U.S. Department of Housing and Urban Development (HUD) has a list of approved counseling agencies on their website, and following are other organizations that provide credit counseling services.
Non-Profit Credit Counseling Providers
Following is a non-profit organization that provides credit counseling services. Non-profits often provide their services either free of charge or for a small fee.
Private Credit Advisors
We’ve partnered with ApprovalGUARD to offer you free credit analysis, that includes what your credit score is and a phone conversation with a credit expert who can give you insight into why your score is what it is and ways to influence it. As a private credit advisor, it’s important to note that introductory services may be provided for free, but there will be a fee for any additional services you choose to purchase.