Are Low Credit Scores Keeping Millennials from Buying a Home?
A recent TransUnion survey found that a third of American millenials aged 18 to 34 are looking to buy a home within the next 12 months, but 43% of them have subprime credit scores.
TransUnion senior vice president Ken Chaplin says that credit scores are important in the home buying process. Credit scores is a huge factor that affects the size of the mortgage payment, the interest rate on a home loan, and even whether or not a home buyer will be qualified for a home loan.
“People with subprime credit may face financial barriers to homeownership, making it difficult for their dream home to become a reality.”
--Ken Chapin, Senior Vice President, TransUnion
TransUnion also found that a third of millennials aged 18 to 34 have VantageScores between 300 and 600-- scores that are regarded as subprime. Their average VantageScore for millennials is at 625; approximately 42 points lower than the national average at 667.
FICO data also show that the credit scores of millennials are the lowest compared to those of other age groups. In spite of lack of categorizing scores as prime or subprime, lenders still see the comparable difference and regard young buyers as more likely to have lower credit scores. Falling below a 699 FICO score means a buyer would not obtain the best rate to borrow money-- a common case among young buyers with "subprime" credit.
Answering the question, "Are low credit scores keeping millennials from buying a home?", the answer is an absolute YES. While young buyers may still be able to obtain a loan, they might not want to push through with purchasing a home if they are not getting the best rates. Experts advise waiting and building on your credit score instead of taking the plunge.
To know more about this post, you may visit Bob Sullivan's original article published on Credit.com here.