If you’ve been working on finding financial security and finally feel ready to make the biggest purchase of your life — a home — you may be wondering what part your credit score plays in the overall picture. Depending on your mortgage lender, there are a variety of factors to be considered for whether or not you will be eligible for a loan that you can live with for years to come. This is why it’s crucial for anyone thinking about purchasing a home to make sure their credit and finances are in tip-top shape before starting the home-buying process.

Is Your Credit Up to Snuff?

The truth is, the better your credit score, the better your interest rate tends to be —but this doesn’t mean you’re out of luck if you don’t have perfect credit. Most experts agree that the minimum credit score for a reasonable loan starts between 620 and 660. If your credit is midway through the 700s, you’ll qualify for even better rates.

Why Your Interest Rate Matters

It pays to have the best credit score possible when you apply for your loan because it is an important factor in determining how much interest you pay. While a fraction of a percent might not seem like much to you now, remember that mortgages often extend over several decades. The difference of even half a percentage point can add up to tens of thousands of dollars over the course of many years.

Even if you’ve found the perfect home at a great price, it often makes far more financial sense to wait until your credit and other finances are in order than to jump at the first good opportunity. Remember: You’ll be living with your decision for the next 5+ years, and you absolutely want to set your future self up for financial success, not failure.

Other Financial Factors

Your credit score is perhaps the most important piece of the puzzle when lenders are judging your application, but it’s not the only factor. Being in great financial shape starts with good credit, but it also means being able to maintain good credit in the future. Do you have a savings account or other liquid capital? Are you employed steadily? Have you ever declared bankruptcy? Do you carry significant amount of debt? Having a well-rounded financial life dramatically increases your ability to maintain a good credit score, and to be able to negotiate the lowest-interest mortgage for your dream home.

How to Improve Your Credit Score to Buy a Home

If you make smart choices when buying your home, you can reap the financial rewards of your investment — and it all starts with your credit score.

Improve your credit score to improve your mortgage interest rate and save yourself lots of money down the road. Here’s how to start:

  • Always pay your bills on time
  • Never max out your credit cards
  • Stay out of debt
  • Don’t open multiple new lines of credit at the same time
  • Swiftly correct errors on your credit report
  • Seek the help of credit repair specialists

Owning your own home can be one of the most emotionally and financially rewarding purchases of your life. Go about it the right way by waiting until you have your best-possible credit score. Need more help figuring out how to get there? We’d love to talk to you about how you can start improving your credit score so you can purchase a new home!