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Changes in Credit Scores: Is it Truly Scary?

Are The Changes in Credit Scores Really Spooky? How Not to Let Them Haunt Your Home Buying Experience

Boo! Did we scare you? Hopefully not, we’re just having a little Halloween fun. But there are some things going on in the financial market right now that could feel a little spooky, especially with the recent news from Equifax and the compromise of data for millions of customers.

But did you know that there were big changes in credit scores over the summer? While Halloween still seemed so far away and we were celebrating with summertime fun, all three credit reporting agencies removed a pretty significant number of tax liens and judgements that appear on consumer credit reports. And the removal of these records had the potential to boost credit scores for millions of Americans.

So why is this scary? Well, what seems like a great deal for home buyers may make the job of mortgage lenders a little more difficult. Let’s take a closer look at the changes and their impact.

How Credit Scores Impact Home Buying

In the simplest terms, your credit score has a direct impact on potential mortgage rates. The higher your credit score, the lower your interest rates. For example, a credit score of 740 or higher can qualify a potential home buyer for the best interest rates from most lenders. A borrower with a credit score under 620 may have a more difficult time, however it isn’t impossible.

Even just one percentage point can greatly impact the monthly payments on your new home.

Lenders will look for a variety of things when determining eligibility for borrowers. They include:

  • Low balances.
  • History of on-time payments.
  • Mix of credit (such as car loans or credit cards)

But buyers do maintain some control over their numbers. For example, it’s recommended that individuals check their credit score a year or so before buying a home. This will provide you with the time you need to make adjustments and corrections and change your habits to improve your financial position.

To have the best chance at buying a home with a favorable interest rate, avoid opening new lines of credit before you buy. Don’t open multiple credit card accounts within a short period of time. Though some payments such as a car loan or student debt might be unavoidable, you can lessen the impact.

What The Changes Mean for You

In July, up to 12 million Americans saw an immediate increase to their credit scores while these tax liens and judgements were removed from credit reports.

While potential home buyers are thrilled by this change which can allow them opportunities for lower interest rates and monthly payments, lenders are a little more concerned. These credit scores were a predictor of the lending risk when working with consumers, but this change alters that formula.

Potential buyers need to understand that just because these items no longer appear on their credit report they are not absolved. Public records searches, which are done by mortgage lenders during the process, will still show any outstanding judgements and unresolved tax liens and consumers are still responsible for their resolution.

Prime Mortgage Lending Inc. wants to help you avoid buying a home haunted with the ghosts of your financial past. They can work with you to get the best rates available and into a home this fall. Contact Zachery Adam and our team in West Asheville to learn more.


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