Raising credit scores can help Gen-Xers obtain lower mortgage costs and interest rates
Gen-X renters had more trouble affording a home due to their weak credit profiles than Gen-X homeowners, according to data from LendingTree.
The report analyzed the credit profiles of over one million Gen-X users on the MyLendingTree platform to determine whether homeownership could improve the financial prospects of Gen-X renters.
LendingTree found that renters have a median of four financial accounts compared to homeowners, who have nine accounts.
“This reflects the higher credit scores of Gen X homeowners as they are able to obtain more credit accounts,” wrote LendingTree. “Many renters may face difficulty accessing credit due to their lower credit scores.”
Homeowners have a median credit score of 672, compared to 586 for non-homeowners. Higher credit scores are good news for potential homebuyers, as higher scores increase their chance of achieving homeownership.
“The first step to homeownership is a strong credit profile, and our study of Gen X finances found that renters have meaningfully weaker credit profiles,” LendingTree wrote. “Although renters carry less debt, homeowners appear to manage their obligations better – accounting for lower delinquency rates and higher credit scores.”
On-time mortgage payments could also push credit scores starting about a year after the home purchase, according to the report.
“Whether you are a homeowner or a renter, there are steps you can take to improve your credit,” LendingTree wrote. “If you are renter who aspires to homeownership, raising your credit score will increase your options in terms of the types of loans you can access. Borrowers with higher scores also get lower interest rates, which lowers the monthly costs of a mortgage and means you pay less interest over the life of the loan. For homeowners, increasing credit score could give you an opportunity to refinance your mortgage at a lower rate.”
