Home buying season is in full swing in Hong Kong. With proper planning and responsible financial management, you can save money while finding the perfect place for your family. Here are a few helpful reminders of the vital role your credit health has in the process of purchasing a home.
What Credit Scores Measure
Your credit score is calculated based on data in your credit report. Your credit score reflects three key facts about your financial situation: the amount of debt you hold, the risk you won’t pay borrowed money back, and use of available credit. This means taking certain seemingly positive actions just before buying a home—increasing your income or paying down debt not listed on your credit report—may not have much of an impact, if any, on your score.
What Credit Means for You
Your credit can influence the type of home you can afford in three important ways, but our survey found that only about half of respondents could identify them. If you’re planning to purchase a home, you should know that your credit may affect the interest rate of your mortgage and the amount of money that you borrow to buy a home.
How to Prepare
Regularly checking your credit helps you make sure it’s just as ready for the mortgage process as you are. But what about timing? Nearly one-third of people surveyed believed checking their credit one month before purchasing a home was a good timeframe. But this may not provide enough time to take action if you discover your credit report lists information—resulting from fraudulent activity, like identity theft, or from old, unpaid credit card debt—that could negatively affect your credit score. TransUnion recommends you check your credit report and score at least three months leading up to a mortgage application.
Buying a home is a terrific milestone, but it is also a big decision with a potentially long-lasting impact on your financial well-being. It’s important that you take the time to do your homework before signing on the dotted line: ensure your credit score is based on accurate credit report information and find a home that fits your budget.