When you want to purchase a home, one of the first things that you will do is secure the financing that will enable you to buy the property. Securing that financing involves meeting with a financial institution and that meeting will surely entail a check of your credit history and an analysis of your credit score.
The average credit score in the United States is roughly 720 and those with scores above 720 are considered very creditworthy. For those with scores below 720, purchasing a home is still possible. Many buyers will choose the FHA loan, a program instituted by the Federal Housing Authority, which will all those with credit scores above 620 to secure a loan.
A lending institution will look at a credit score and a credit history to determine how much it will lend (if it lends at all), how much that borrowing will cost, and the length of the loan. Higher credit scores will deem someone less of a credit risk and allow a financial institution to lend that person more money. The opposite is true for someone with a poor credit score.
The interest rate, or the cost for borrowing the money, is related to a credit score and history as well. People with lower credit scores will be charged more, a higher interest rate, than those with higher credit scores. A higher interest rate on a mortgage will mean a higher monthly payment for the borrower.
In the end, having a higher credit score is beneficial when making a major purchase such as a home. People receive better loan terms and save more in the long run.