Understanding what impacts your credit score, can help you save money on your next home purchase. Credit scores range from 300 to 850, with 850 being the best. You need a credit score of at least 620 to qualify for a home loan, and 740 to get the best interest rate and terms.

You are entitled to a free copy your credit report once a year, at www.annualcreditreport.com. There are 3 major credit-reporting bureaus, Equifax, Experian, and TransUnion. You can also request your credit score for a small fee. 

Once you review your credit report, you can have errors corrected, by contacting the credit bureau to dispute the inaccuracy. Make sure and review all 3 credit bureaus as they don’t always have the same information, and you want them all to be correct.

Late payments will reduce your credit score, so it is important to pay your bills on time. Credit card companies, car loans, mortgage companies, etc. all report your payment history to the credit bureaus monthly. When applying for a home loan, lenders like to see the last 12 months with no late payments.

Another good way to boost your credit score is to keep your credit card balance below 50% of your credit limit and if possible, try to pay the balance in full every month.  This will also save on the interest you pay on your credit card account. 

The length of your credit history also impacts your credit score. If you’ve had a credit card for many years and paid it on time, your credit score goes up. Applying for a new credit card can decrease your score, and having too many credit cards, can also push down your credit score. If you have a credit card that you don’t use, don’t close the account, as that can lower your credit score as well. 

Credit repair can take time. If you have had a bankruptcy, lien, foreclosure, or judgement, it could take several years before you can qualify for a home loan. An experienced real estate agent or lender can help you determine the best time to buy your next home.


Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.