When you apply for a loan, your lender will look at several things:

1. Down payment amount

2. How long you have been employed in your current position

3. Whether you have the funds on deposit for your down payment and closing costs

4. Your income-to-debt ratio and 

5. your credit report

Lenders nowadays place much more emphasis on the credit report. Credit bureaus compile a record of debts from credit card companies, banks, department stores, and other firms. This information appears on your credit report, so it shows whether you pay your bills on time. Lenders develop credit ratings based on how well you manage this function. The higher your credit score, the more flexible lenders will be in loan approval and specific requirements.

When you meet with lenders, ask how they decide if you are a good credit risk. It is likely to be from a credit report. Lenders can order the credit report for you and discuss your score. If your credit is less than perfect, they can usually offer suggestions on how to strengthen your credit position.

Now that you know the importance of credit when it comes to buying a house.

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