In the Ask Savvy community group, reader Mrs-B wonders if she should wait for her poor credit score to improve before buying a home.
I reached out to credit expert Bethy Hardeman from CreditKarma.com, a free credit management service that provides free credit scores, financial education, and personalized savings recommendations. The firm helps more than three million consumers realize the everyday cost savings of having a good credit score.
I recently got married and want to buy a house in a year. Problem is, my husband bought one about a year and a half ago (before we got married). He cannot take out another mortgage yet so it will have to be in my name. I have poor or fair credit but am trying to fix it. I messed up my credit when I was 18 (those first time savings are tempting!), let it get bad until two years ago, and have raised my score almost 70 points since March. It's still not good enough though. I have a new secured credit card which should help, but I also have three student loans in deferment. Is it better to wait for my score to improve since some negative things will be cleared from my credit report within six to eight months, or take the smallest loan out of deferment and start paying it off? We need to save for a down payment, but a good credit score is important too.
Here are some reasons why Bethy thinks Mrs-B should wait for a good credit score:
Should I buy a home, or should I wait?
First of all, kudos to you for raising your credit score 70 points in the past six months! You must be doing lots of things right with your credit. But even though it may seem like a good time to buy a house because home prices and mortgage rates are at historic lows, it’s wiser to wait for your credit to improve even more. Before you make a decision, let’s take a look at both sides:
The case for buying
First, ask yourself why you want to buy a home so soon. Is it because you want to build equity in homeownership? Do you prefer owning to renting? Is the housing market in your area ripe for buying? All of these can be great reasons to want to invest in a home.
Although renting allows you the time to save up a bigger down payment and build your credit, it doesn’t help you build any equity. Buying a home gives you that opportunity, especially because prices are low and the housing market should be shaping up in the next few years. It’s a long-term investment that can really pay off in the long run when it’s time to sell.
Read on to find out more.