Summer means warmer weather and increased home sales, but many homebuyers dread the process. The majority of homebuyers (95 percent) know that credit is important when purchasing a home, and those who know their credit scores feel significantly more prepared to buy according to a new survey commissioned by Experian. In addition, 45 percent of future homebuyers say they delayed purchase to work on their credit and qualify for better interest rates.
“No one likes to go into a lender’s office, whether buying or refinancing, and not know the state of their credit; it makes them feel helpless,” says Becky Frost, senior manager of consumer education at Experian Consumer Services. “Our survey shows when people interact with their credit by tracking it and learning more about the factors that affect it, they feel more confident about their purchasing power.”
The survey results show the difference that credit knowledge makes in the home buying or refinancing experience.
Knowledge = power:
- People who know their credit scores feel significantly more prepared to buy a home versus those who do not know their credit scores (70 percent vs. 54 percent).
- The majority of homebuyers understand the importance of their credit scores in securing favorable interest rates to refinance their home (62 percent).
Uncertainty = concern:
- Some groups are uncertain. Future buyers are anxious about getting good interest rates, with 41 percent are concerned their credit score won’t qualify for the best rate available.
- Of the respondents who say they were concerned their credit status would hurt their ability to purchase a home, 27 percent do not know their credit score.
- Of the respondents who do not know their credit score, 48 percent are concerned that their credit status could hurt their ability to purchase a home.
- Fifty-eight percent of future homebuyers indicate that they are actively workingto improve their credit in order to qualify for a better home loan interest rate. They take specific action, such as paying off debt (55 percent), paying bills on time (54 percent), keeping balances low on credit cards (28 percent), protecting credit card information from fraud/identity theft (20 percent), and not applying for or opening new credit accounts (16 percent).
Beyond the score:
- Seventy-four percent of recent buyers recognize the impact of poor credit on securing a good interest rate, but fewer (61 percent) understand the potential effects of identity fraud on the financing process.
- Sixty-two percent of future buyers are confident about their credit status, and 60 percent feel financially prepared to buy a home.