Your credit history has a lot to do with whether a lender will approve you to borrow money for a new home. It’s a picture of your financial history, and lenders use it to predict whether you’ll repay their loan.
That’s why it’s so important that you understand your credit and take the time to repair any issues on your credit report before you apply for a loan.
About Credit History: How it Applies to the Lending Process
Your credit history shows lenders a number of things about you, including how quickly you pay off your debts such as credit cards and car loans. It shows whether you can handle utility bills, rent and other financial obligations, too.
When other lenders trust you with money, it’s easier to get a home loan. Your credit history will show a lender that you’ve been responsible enough to handle making on-time payments, which makes them more likely to approve you.
Most credit histories go back about 7 years, which gives lenders a look at how you’ve recently handled your debts.
Things that Scare Lenders
We all know that bankruptcies, foreclosures and late payments can prevent lenders from approving your loan, but there are other things that can cause them to think twice, as well.
What else causes lenders to question your credit worthiness?
- Opening several new credit accounts within a short period of time
- Co-signing on credit that goes unpaid
- Paying only the minimums on your credit accounts
- Having a large number of “hard” inquiries on your credit report
If you’re monitoring your credit, you’ve set aside a down payment and you’re actively improving your financial profile, though, you shouldn’t worry too much about these things.
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Understand Your Credit