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Credit Scores Matter More In A Competitive Housing Market, A New Study Shows

[Friday, February 1st, 2019]

When it comes to applying for a credit card, getting approved for a rental apartment, and even getting a job, your credit score can make a difference as to whether you land the position, are offered a lease, or get that elite travel rewards credit card. But those aren’t the only times your credit history matters.

A new study from LendingTree illustrates how important it is for potential homebuyers to have a good or excellent credit score. The study looked at the 50 largest metropolitan areas in the United States and ranked them according to how competitive their housing markets are. The criteria for gauging how tough the competition is included what percentage of buyers have good or excellent credit––defined as a credit score above 680.

Having a great credit score not only makes it easier to secure a mortgage, it means you’ll likely be offered a lower interest rate on that mortgage than if you had poor or limited credit. In the ten most competitive housing markets, 57 percent of buyers have good to excellent credit. That means folks who live in one of these areas (including the top three most tricky markets: Denver, Los Angeles, and Portland Oregon) need to have extremely good credit if they want to increase the chances of buying their dream home.

Competing in a tough housing market

If you’re planning to buy a home in the near future, but your credit score is below that 680 threshold, there are things you can do to make it stronger, and therefore make yourself a more competitive buyer in a tight housing market. Improving your credit score will also improve your odds of getting approved for a mortgage with an affordable interest rate.

The first thing you’ll want to do is order copies of your credit report from all three major credit bureaus and FICO. Take a close look at them and see what could be dragging your score down, then take steps to correct it. Make sure to bring all your accounts into good standing, and pay your balances by the due date.

If you need a credit card for customers with bad credit, you have options. There are many credit cards for folks with poor credit or limited credit who want to rebuild a bad credit score or establish their credit history. Once you’ve done this, your chances of getting a great mortgage will be greatly improved.

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