Bad Credit and Millennial home buyers

Bad credit is around when you cannot meet payments on your credit agreements. Sadly this has turned into yet another millennial dilemma (other than excessive competition, and debt to income ratios to name a couple). Most of the millennial need to go through college by acquiring huge student loan yet whatever they earn during that time is too meager to keep up. The new generation of home buyers is facing some tough financial checks as compared to the previous generations. Many of them also have bad credit scores. This can affect interest rates offered, possible extra points a mortgage borrower may have to pay, and whether or not the potential borrower can be approved for a home loan.

The credit report

It is a document that contains details of your credit activity and current credit situation. This particular report is the basis upon which borrowers are assessed. A reporting firm will collect details about people and take a detailed look at their credit reports.

Why are credit scores so important?

Credit scores affect consumers in several different ways. A landlord would not want to hand over the keys to his house to someone with a bad credit. Why? Because they would want the buyer to pay off the money swiftly without hitting any bumps down the road.
When it comes to the real estate licensee, the buyer’s credit score can be of grave importance as it will decide what the client can afford. Similarly, it will also decide the amount of loan or financing the client can get. Moreover, it will also size up whether or not a potential buyer can be approved for a conventional mortgage.

Improving credit scores

The combination of high debt, low income, and (in many cases) bad credit creates challenges for the average Millennial. There are divided opinions whether one debt is general is good or bad, but what if one needs to take it and depend on their credit cards? This is the case with the millennial these days. It is a must! One needs to tag along a guidance counselor for the money matters to help them decide what to do when it comes to asking for loans and the repaying them.
Some basic advice that applies to most potential buyers is:

• Pay down credit card debt. Pay off the highest interest debts first.
• Save as much down payment as possible (after paying down debt).

Mortgages usually have lower interest rates than credit cards.