Don’t let any of these common credit score myths keep you from getting a better score and a lower payment on your new home.
8 Common Credit Score Myths
1. Myth: If I go to a free online credit reporting service, I will get a complete understanding of my credit rating.
Fact: Most of these services will only pull your credit from one of the 3 credit bureaus. When you apply for a mortgage, the lender will check all 3 bureaus because they know the lender will do the same and use the middle score, not the high or low, to evaluate you. The scores can vary significantly.
2. Myth: You need a credit score of over 620 to get a mortgage.
Fact: There are a variety of loan programs available and a good broker can often find loans for as low as a 500 credit score. The rates may be higher for these loans but they can be valuable tools for homebuyers with lower credit scores.
3. Myth: having a broker run my credit will negatively impact my credit rating.
Fact: the benefit of knowing your score far outweighs the risk in my opinion. I have been doing this for years and have yet to see a situation where a score was negatively impacted in a meaningful way from this process.
4. Myth: There is nothing I can do to improve my credit score.
Fact: While there is no quick fix that will magically give you an 800 credit score, there are a variety of things you can do to improve your score. It all starts with running the report and from there we can look at your personal situation and see if/where improvements can be made.
Check out the free downloadable infographic entitled “Separate Credit Score Fact from Fiction.”
5. Myth: Paying off all my debt and canceling accounts will immediately improve my credit rating.
Fact: This one is a bit of a balancing act. Paying off all debts is a great way to improve credit scores but closing the accounts lowers your available credit. Since the proportion of credit to credit available is an important measurement for your credit score, closing accounts lowers your amount of available credit making any balances appear as a higher % of the total available credit. i.e if you have $10,000 in available credit and $5,000 in credit debt your proportion of credit used to credit available is 50%. If you close an account with a limit of $5,000 and keep the $5,000 in debt in another account, your proportion is now 100%. That could affect you negatively.
6. Myth: If I have a large amount of cash in the bank, it will improve my credit score.
Fact: While cash reserves may improve your ability to get a mortgage, they will not impact your credit score.
7. Myth: Checking my own credit will negatively impact my credit score.
Fact: Checking your own credit will never have a negative impact on your score and we recommend checking your score at least once, if not twice per year.
8. Myth: If I always pay my bills on time and never use credit, I will have a good credit rating.
Fact: In order to build good credit you need to use credit responsibly. Lenders want to see a history of documented behavior. If you pay cash for everything, even if you are always responsible, you will not necessarily have a good credit score.
Remember, understanding your score early can make a big difference in how much you end up paying for a mortgage. If you are ready to get a new mortgage or to refinance a home anytime in the next 12 to 18 months, click the button below and get pre-approved. It is the first critical step to getting the best loan for you.
If you would like more information on how DiVita Home Finance can help improve the entire homebuying experience, access the California Homebuyer’s Toolkit now.
California Homebuyer’s Toolkit
The California Homebuyer’s Toolkit is a comprehensive guide to buying a home.
