COSTA MESA, Calif.—A new study indicates that mortgage lending may get a boost due to consumers improving their credit scores.
A new report from Experian shows that the majority of homebuyers (95%) know that credit is important when purchasing a home, and those who know their credit scores feel significantly more prepared to buy today.
In addition, the study reveals that 45% 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,” said 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, Experian stated. Some key study points:
- People who know their credit scores feel significantly more prepared to buy a home versus those who do not know their credit scores (70% vs. 54%).
- The majority of homebuyers understand the importance of their credit scores in securing favorable interest rates to refinance their home (62%).
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Of the respondents who said they were concerned their credit status would hurt their ability to purchase a home, 27% do not know their credit score.
Of the respondents who do not know their credit score, 48% 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 working to improve their credit in order to qualify for a better home loan interest rate. They take specific action, such as paying off debt (55%), paying bills on time (54%), keeping balances low on credit cards (28%), protecting credit card information from fraud/identity theft (20%), and not applying for or opening new credit accounts (16%).