Credit is just about everything when it comes to buying a home. You need credit to buy the home (the mortgage), you need credit to qualify for the mortgage, and your mortgage payments will impact your credit if they're not paid or not paid on time.

Many home buyers, particularly first-timers, don't fully understand the impact that credit has on the home buying process. Here are 3 things that home buyers need to know about credit.

1. You need good credit

Your credit score tells lenders a lot about you, whether you pay your bills on time or at all. This tells them whether you'll be able to handle the long-term responsibility of a mortgage and whether they'd need to worry that you might not be able to pay it.

Most reputable lenders won't give a mortgage to someone with a credit score of less than 620.

2. The more hard inquiries there are, the lower your credit score gets

Any time you apply for credit, it results in a hard inquiry on your credit report (a soft inquiry occurs when someone checks your credit as part of a background check and does not affect your credit). These hard inquiries decrease your credit score.

The good news? If all of these hard inquiries occur within the same 45-day period, FICO (the organization that assigns your credit score) will count all of them as one inquiry. This means if you can apply for and get approved in this time period, you'll limit the damage to your credit score.

The bad news? If you've applied for other loans, new credit cards, or credit accounts with stores or websites, these will reflect as hard inquiries on your credit and could have a negative impact on your chances of getting a mortgage.

3. Higher credit = lower interest

Better credit means better interest rates, and better interest rates mean a lower monthly mortgage payment and less money paid back overall. So you don't just want good credit, you want the best credit you can get. This means you should pay off some, but not necessarily all, of your debt, don't open or close any credit card accounts, dispute any mistakes you find on your credit report, and make sure that you use credit responsibly when you're getting ready to start looking for a home.

When it comes to buying a home, unless you have all the cash you need to pay for it on your own, credit will be a necessary factor. As long as you're responsible, cautious, and realistic, you should have no trouble getting a loan. Even if you've been a little irresponsible or reckless in the past, you can clean up your credit and still be on track for a home loan, with a little effort.

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