"The most important focus for all potential buyers should be improving their credit score," says Jean Badciong, chief compliance officer of Inlanta Mortgage in Brookfield, Wisconsin. "A low score can prevent someone from buying a home or at least from qualifying for an affordable mortgage rate."
Where to get the credit score
Greg Holmes is national director of sales and marketing for Credit Plus, a company in Salisbury, Maryland, that provides credit reports to mortgage lenders. He says potential buyers should request their free credit report at AnnualCreditReport.com.
"Some people who think they have good credit don't, while people who think their credit is bad may be surprised that it is actually OK," Holmes says. "Everyone should check their report for accuracy and fix any mistakes. It can take months to correct errors."
How to raise the credit score
To improve their credit scores, buyers should pay off past-due bills, pay every bill on time and reduce their balances to less than 30 percent of the credit limit on every account, Holmes says. Also, it is best to have three to five credit accounts, such as a car loan, student loan or credit card, for one year or longer.
Holmes recommends against frequently switching credit cards to get the best rate, though.
"Lenders do not want to see a lot of credit inquiries or too many new accounts because this could indicate someone who is about to take on a lot of extra debt," Holmes says.
Beware the pitfalls
Kirchner says people often do not realize the consequences of paying bills late or missing a payment, which can stay on your credit report for a long time.
Some young people assume they can improve their credit scores as an authorized user on a parent's card. But Badciong says this will have no impact on their score.