Home, Sweet Home Buy: Why A Good Credit Score Matters

By John L. Fischer, Personal Finance Writer   

Figuring out exactly what's going on in the home-buying market today isn't easy. But if you have a good credit score, you will save money — when it comes time to buy and for as long you own your home.

So even though the home-buying market is anything but a "sure thing," make book on one thing:

Better credit scores can lead to better financial deals on everything.

Home, sweet home-buying tip #1

Most industry pros say that if you have a credit score better than 660, your credit is considered "good." Showing lenders and mortgage brokers you have good credit isn't "showing off." It's just plain smart.

Home, sweet home-buying tip #2

Now let's talk some home-buying specifics. That good credit score of yours can:

  • Help you get a better mortgage rate. The higher your credit score, the more leeway you get.
    And not just from brokers and lenders — you might also get a break on your down payment.

And the same goes for the house where you live currently; the higher your credit score, the more likely you can:

  • Consider refinancing. If your credit score rises while you're paying your current mortgage, you'll be able to get a better loan rate. Just make sure you plan to stay in the house long enough to justify refinancing. (A new loan will carry some added short-term costs.)

Home, sweet home-buying tip #3

Here's where that good credit score can really pay off — on home improvements. Once you're in your home, you can save additional money through:

  • Home equity loans and home equity lines of credit. These allow you to receive cash by borrowing against the equity in your home. And both options work well if you have a good credit score.

    Remember, these loans are based on the amount of equity you have in your home. Fortunately, unlike a home mortgage, you don't start out owing a large principal amount. Plus, with a home equity line of credit, you don't have to spend it all, so you're only on the hook for what you do spend (plus interest, of course).

Bottom line: The higher your credit score, the lower the interest rate you can get. In the long run, that's more money in your pocket.