Despite the glamour of the movies, most people don’t carry a silver briefcase of cash to make major transactions. Most realtors don’t expect it, either. Before considering purchasing a house, make sure you have good credit. Good credit not only means approval for a mortgages and home loans but low interest rates, possibly saving you thousands of dollars.

Credit Determines Interest Rates

Not only does credit affect your interest rates but it affects your homeowners’ insurance. Insurance companies use several factors to determine eligibility and premium prices. According to the Insurance Information Institute, many insurers have found credit history to be an accurate predictor of risks. Though insurers use the same factors as lenders, they analyze them in a different way.

The major difference is that creditors look for a reliable pattern while insurers look for stability. According to the Fraternal Insurance Counselors (FIC), 35% of your eligibility is based on your payment history, 30% is based on your balance, 15% is based on the length of your credit history, 10% is based on how many new accounts you’ve opened in a short period of time, and the last 10% is based on the types of accounts you have (for example, retail accounts and accounts with finance companies). Overall, insurers are more interested in how regularly you pay than how much you owe. If you still find yourself with high rates, don’t be afraid to shop around for other companies.
 
In the same way your credit affects homeownership, your homeowner abilities affect your credit. The top destroyers of credit are public charges, also known as public records. If you cannot afford to pay your mortgage and experience foreclosure, this will majorly impact your credit report and score. Remember, nothing in the credit world simply vanishes. Public charges can stay on your credit report anywhere from seven to ten years.
Homeownership is a large responsibility that should not be taken lightly. Before buying a house, weigh all of the risks and determine whether or not you can afford such an expense.