CreditCards.com

Living with credit, Research, regulation, industry reports

Low credit scores lead many to delay buying a home, study finds

Peter Fullam

Despite a home-buying climate of low mortgage rates, many U.S. consumers are putting off buying homes because they are worried their credit scores may not be good enough, a recent survey finds.

According to the Consumer Homebuying Survey 2016 conducted for Experian, one of the three big credit bureaus:

  • 45 percent of respondents said they have delayed purchasing a home in order to improve their credit scores.
  • 35 percent of potential homebuyers said their credit scores might hurt their ability to purchase a home.
  • 29 percent said they would purchase a more expensive home if they had better credit and could qualify for a larger loan.
  • 20 percent (one in five homebuyers surveyed) said they would have to forgo or opt out of the home loan process for at least five to 10 years, due to low credit scores.

Putting off buying a home to buy time to buff one’s credit score can be smart, given that credit scores are one of the factors that affect your mortgage’s interest rate.

“This can make a big difference in money saved over the long-term of your loan,” says Rod Griffin, director of public education at Experian. “Most often, the higher your credit score, the lower the interest rate. It also influences if you can get a home loan at all.”

The survey found that Americans, in general, are doing the right things to get their credit in shape to buy a home:

  • Nearly 70 percent said they are paying bills on time.
  • 60 percent are trying to pay down their debt.
  • 28 percent of those planning to buy a home said they are keeping their credit card balances low.

Credit experts also advise keeping your finances consistent leading up to the home buying process.  For example, it’s not a good idea to apply for new lines of credit such as opening a new credit card in the months preceding applying for a mortgage. “Opening new accounts can decrease a credit score in the short-term,” Griffin says.

The takeaway: “Consumers should check their credit score and credit report at least a year prior to buying a home so they have time to make changes to improve their credit score or correct errors in their credit report,” Griffin says.

The online survey was conducted by Edelman on behalf of Experian from February 19–24, 2016, among 500 adults who purchased a home within the past year or plan to purchase in the next year, and who reside in the United States. The survey results were released April 15.

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, we ask that you do not disclose confidential or personal information such as your bank account numbers, social security numbers, etc. Keep in mind that anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.