How to Buy a Home With Bad Credit — and Improve Your Credit

By: Melissa Dittmann Tracey

Credit issues play a big role in preparing to buy a home. Here’s how to avoid buying a home with bad credit.

Too often, this scenario unfolds: A young consumer buys too much on credit while setting up a new place to live and preparing for a first job. Years later, they find their freewheeling use of credit took a big toll on their credit score. It matters now because they want to buy their first home, but they’re dealing with a low credit rating – in other words, bad credit.

Bad credit isn’t always a deal breaker, however. “Buying with bad credit is possible, but you may need to work on getting your score up, depending on how bad your credit is,” says Marco Smith, a real estate professional with The Maryland & Delaware Group at eXp Realty based in Fulton, Md. Some loan programs, such as FHA, aim to help borrowers with lower scores.

Nevertheless, a credit score is important. “When it comes to home ownership, your credit score is one of the major factors in determining what your loan terms will be,” says Brian Boruszak, senior home lending adviser at Chase Home Lending. “It’s a big part of what lenders use to assess whether you’ll be approved for a mortgage and if so, at what rate.”

Real estate and mortgage experts explain the basics and tips about buying a home with bad credit while improving your credit.

Understand and Interpret Credit Scores

A credit score is a three-digit number ranging from 300 to 850 that reflects your creditworthiness, or the likelihood you’ll pay your bills on time. A higher score indicates a person who’s considered less of a credit risk.

The score is based on:

• Payment history

• Credit utilization ratio (the amount owed)

• The length of credit history

• New credit

• Credit mix (the variety of credit accounts you have, like credit cards and other types of credit)

• New credit inquiries and account openings

  
  

The most widely used credit scores are FICO (from the Fair Isaac Corp.) and VantageScore.

What’s a Good Credit Score vs. a Bad Credit Score?

Here’s where your score falls:

Average credit score for a first-time buyer, according to Lending Tree: 700

How to Get Your Credit Report

Each year, you can request to receive by mail one free copy of your credit report from the three major consumer credit reporting firms:

• Experian

• Equifax

• TransUnion

  
  

You can do this in one step at AnnualCreditReport.com. You can also review credit reports online for free once a week.

Measuring the Impact of a Credit Score

Higher credit scores can influence the types of mortgages you qualify for, including whether you’re eligible for a larger loan, a lower down payment, lower loan fees, or a lower interest rate. “Any score in the mid-700s or above is considered good and could help you qualify for lower interest rates,” Boruszak says.

Here’s an example of how a credit score translates into dollars. Earlier this year, a borrower with a credit score of 620 typically qualified for a 7.89%, 30-year fixed-rate mortgage. A home buyer with a 760 score, however, qualified for an average rate of 7.18%, according to Experian. On a $400,000 home, with 20% down, that could translate to a payment difference of about $150 more per month — or $1,800 a year.

Most lenders require a score of at least 620 for a conventional loan, which is any mortgage loan that isn’t insured or guaranteed by the government (such as under the Federal Housing Administration, the Department of Veterans Affairs, or the Department of Agriculture loan programs).

If you’re a first-time buyer with bad credit, you may have access to special loans. For example, the Federal Housing Administration may accept scores in the 500s and are a popular choice for first-time buyers.

FAQs from Potential Borrowers With Bad Credit or No Credit History

If you have bad credit, you may be looking for answers to these questions:

Can I Buy a Home With No Credit History?

“For buyers with no credit history, manual underwriting is a path forward,” says Elena Novak, a lead real estate researcher and analyst at PropertyChecker.com. The process can help applicants with a “thin credit file or low credit qualify for a loan,” according to Experian. An underwriter will review documents that verify income and assets to determine qualifications to borrow. “Lenders can review alternative data, like rent, phone, and utility payments,.” Novak explains. Such alternative reviews for on-time payments can show creditworthiness to a lender.

Potential borrowers with a limited credit history may need a co-signer on their mortgage. That’s typically a close family member with good credit, Smith says.

How Does My Credit Score Affect Loan Eligibility?

Credit scores influence what type of loan you’re eligible for. For example, conventional mortgages — the most common type of mortgage — often require a credit score of at least 620. With FHA loans, borrowers may qualify with a credit score of 500 with at least a 10% down payment or a 579 score with a 3.5% down payment.

Here are loan types and minimum credit scores from Experian:

How Can I Improve My Bad Credit Score Fast?

Credit scores can shift frequently based on your monthly activity, Boruszak says. “Speaking with a mortgage lender and having them review your credit can help, because they can offer tips on improving your credit,” Smith explains. If you aren’t sure where to start, ask your real estate agent to recommend reputable lenders. Lenders may suggest steps like paying down debt and avoiding new credit applications to help improve your credit score.

Although you may think a credit score involves technical calculations that nonfinancial borrowers can’t understand, the formula is simple. The following tips each outline actions to improve the factors that figure into a credit score. Remember, even small changes can improve scores.

Credit Improvement Tip 1: Make Payments on Time

Payment history accounts for 35% of your FICO score and is the most important factor. Any late or missed payments can significantly lower your score. Experts recommend setting up autopay for at least the minimum payments due or using programs such as Experian Boost. They will give you credit for on-time payments for expenses like rent, utilities, and cell phone bills, which could help you become more creditworthy.

Credit Improvement Tip 2: Pay Down Debt

The amount you owe makes up 30% of your score and includes your credit utilization rate: how much of your available credit you’re using. Mortgage experts recommend keeping this below 30%. “Paying down high debt will boost your credit score, but high interest makes it hard to accomplish quickly, as those fees pile up each month and derail your debt repayment progress,” says Andrea Woroch, a speaker and blogger on consumer financing. You may want to explore tools like debt consolidation loans or balance transfer cards, she says. Avoid maxing out credit cards and be cautious with balance transfers if it means opening new lines of credit, because that could lower your score.

Credit Improvement Tip 3: Don’t Close Old Accounts

Length of credit history makes up 15% of your score and depends heavily on your oldest account. Closing old cards can shorten your credit history and hurt your score. Consider keeping unused accounts active by charging a small recurring bill, but only if you can commit to paying it off monthly.

Credit Improvement Tip 4: Diversify Your Credit Mix

Your credit mix accounts for 10% of your score. For example, a mix of credit cards, a car loan, and a mortgage is more favorable than having just one type of credit. However, don’t try to improve this category by taking on debt you don’t need. It’s a relatively small share of your credit score, financial experts say.

Credit Improvement Tip 5: Limit New Credit Applications

New credit inquiries and account openings make up the final 10% of your score. A single hard inquiry may lower your score by only a few points, but multiple applications in a short time can have a greater impact, according to Experian. Apply for credit only when necessary. These inquiries can stay on your FICO score for up to a year.

Credit Improvement Tip 6: Monitor Your Credit Report for Errors

Review your credit reports from Experian, Equifax, and TransUnion. Errors might be accounts that aren’t yours or incorrect late payments. When you spot them, dispute them immediately with documentation. Learn how at Consumerfinance.gov.

It pays to pay attention to your credit. “Credit scores matter, because they’re one of the first things lenders evaluate when deciding whether to approve a mortgage — and on what terms,” Novak says. “A higher score doesn’t just increase your odds of approval; it also lowers your interest rate. [That] can mean saving tens of thousands over the life of a loan.”

15 Essential Questions for Smart House Hunting

By: Melissa Dittmann Tracey

Here’s how to house hunt to focus on what’s most important and avoid buyer’s remorse.

Buying a home is one of the biggest and most considered financial decisions you’ll ever make. Some buyers may think they’re making a good decision but end up with regret. In fact, 82% of recent homebuyers said they had at least one regret about their purchase, according to a 2024 survey conducted by Clever Real Estate.

Attention-grabbing features like updated kitchens and cosmetic touches like fresh paint can distract buyers, says Gabriella DeBartoli, a real estate pro with the DeBartoli Real Estate Group, part of Huntingon and Ellis, in Las Vegas. When they’re distracted, buyers can overlook the “bones” of the home, including the foundation, the electrical system, and the roof. These items are critical to buyers’ long-term satisfaction and the affordability of a home, she says.

The 80/20 rule has been touted as a good starting point for house hunters. It says that if a home provides 80% of what you’re looking for, it’s a good match. Smart house hunting requires you to go beyond that and make sure the 80% you’re finding is what’s most important. Consider the cost and difficulty in changing what you don’t like.

15 House Hunting Essential Questions for Smart House Hunting

Starting a house hunt can feel overwhelming. These questions can help you avoid surprises and concentrate on what’s most important.

House Hunting Question 1: Can I Afford This Home?

“Too often, buyers start looking at open houses before getting their financial house in order,” says Cara Ameer, a real estate broker with Coldwell Banker’s Vanguard Realty in Ponte Verde Beach, Fla., who is also licensed in California. That’s a mistake. You could fall in love with a home out of your price range.

Start by getting preapproved for a mortgage. A lender will review your finances and tell you exactly what you can afford.

House Hunting Question 2: What Kind of Expert Can Help?

A skilled real estate agent can help spot hidden red flags and craft winning strategies in competitive markets. Interview agents who are active in your local market and know how to negotiate under pressure. In addition, your agent should have a strong network including lenders, inspectors, and contractors. The right agent “will know how to build bridges, work through challenging situations and introduce you to the market with ease,” Ameer says.

The NAR “2024 Profile of Home Buyers and Sellers Generational Trends Report” listed buyers’ opinions about the benefits of working with real estate agents:

• Helped buyers understand the process

• Pointed out unnoticed features/faults with the property

• Provided a better list of service providers (such as home inspectors)

• Negotiated better sales contract terms

• Improved buyers’ knowledge of search areas

• Negotiated a better price

  
  

House Hunting Question 3: Am I Looking Past Finishes and Features?

“The staging can throw us all off,” DeBartoli says. You may be so swayed by that fancy flooring in the entryway that you’re willing to pay a higher price tag. However, for a home with good bones but without the updates, you may be able to add those features you like and end up spending less.

Look for signs like sticking doors, strong air fresheners, and ceiling stains. When you tour homes, test outlets, light switches, toilets, and windows.

House Hunting Question 4: Can I Keep Up With Maintenance?

Impressive finishes and features won’t mean much if you’re constantly fixing or maintaining the place. Ask sellers for the costs of monthly utilities and regular upkeep. Plan to spend 1% to 4% of the home’s value on annual maintenance. Don’t forget outdoor upkeep.

House Hunting Question 5: Am I Accounting for Extra Costs?

“A lot of people think, ‘I have a down payment, I’m ready to shop,’” DeBartoli says. “What about the closing costs?” On a $300,000 loan, closing costs alone could amount to $6,000 to $9,000.

Besides a down payment and closing costs, factor in extra expenses like:

• Property taxes

• Insurance

• HOA dues

• Pool maintenance

  
  

House Hunting Question 6: How Old Are the Home’s Systems?

Ask about the age and condition of key components of the house to get insights about when a repair or replacement may be needed. How old is the roof, and has the seller had any previous issues or made repairs? How about the HVAC? Learn more about the average lifespan of common household systems from InterNACHI’s Standard Life Expectancy Chart for Homes.

House Hunting Question 7: Sniff Out Potential Problems

“Unpleasant odors can be more than just an unfortunate nuisance,” says Courtney Klosterman, home insights expert at Hippo, a homeowners insurance firm. These odors could point to trouble:

• Fishy odors could signal an electrical issue.

• Ammonia could indicate a fridge or washer problem.

• A musty scent could point to mold or excess moisture.

  
  

House Hunting Question 8: How is the Home Oriented to the Sun?

Sunlight affects heating and cooling and how bright the home feels. For example, south- and east-facing homes get more light. North-facing homes may be cooler in summer but cost more to heat in the colder months.

House Hunting Question 9: Is There Enough Space?

Look beyond square footage and evaluate the spaciousness and whether it can accommodate your needs:

• Is there enough garage space for your vehicles?

• Is there room for guests?

• Is it accessible for all family members?

• Will your furniture fit?

• Are there enough bedrooms and bathrooms to accommodate your family’s needs?

  
  

House Hunting Question 10: How Is the Neighborhood?

Use Google Maps to check distance to shops, gas stations, and schools. Test the commute during rush hour. Are the neighborhood’s sidewalks safe? Is there a nearby park? Visit the neighborhood and area at different times of day to check how they fit your preferences.

House Hunting Question 11: Will This Home Work in the Future?

“Focus on a house that’s going to be big enough for the years ahead,” says Lizette Sinhart, a real estate pro from Christie’s International Real Estate in Chappaqua, N.Y., who was featured in the National Association of REALTORS® docuseries “First-Time Buyer.” She recalls a client with young children who nearly bought a 1,000- square-foot house despite her warnings that it could feel too small in a few years. During a final inspection, they realized it was too small and canceled the contract.

House Hunting Question 12: Is the Asking Price Fair?

Let your agent run the numbers with a comparative market analysis. “A CMA looks at value based on square footage, style, neighborhood, and condition,” says Chris Lim, executive vice president and chief growth officer at RE/MAX.

House Hunting Question 13: What Do the Seller Disclosures Reveal?

Disclosures help identify issues early so you can negotiate repairs or walk away. If anything is unclear, ask your agent or an inspector to explain.

These documents are legally required and outline the history of:

• Water damage

• Foundation cracks

• Asbestos or radon

• Infestations

• HOA rules and fees

  
  

House Hunting Question 14: What Does the Home Inspection Report Say?

The inspection may be 70-plus pages, but don’t panic. No house has ever been perfect, and a report shouldn’t be read as “pass” or “fail,” says Matt Cook, a home inspector and director of business development at Chicago-based HomeTeam Inspection Service.

A home inspection will include reviews of the home’s foundation; plumbing, electrical, and HVAC systems; and the roof. “It’s the inspector’s job to list every little thing imaginable,” DeBartoli says. “If there’s a scratch on the wall, they’re going to list it. If the house is falling apart, your agent should respectfully tell you, ‘This isn’t the one, let’s walk away.’”

House Hunting Question 15: Are the Big-Ticket Items in Good Shape?

From your inspection report, focus on what could require spending thousands on future repairs and replacement, including:

• Roof

• Windows

• HVAC

• Water heater

• Home foundation

• Termite or water damage

  
  

If the inspection uncovers problems, you may need to factor in future replacement costs or focus on those areas in your negotiations with sellers.

Get Your Finances in Order Before House Hunting

Make sure your finances are ready before you start looking at houses and answer the questions in this article to get at the most important issues. Once you know you’re not being distracted by cosmetic finishes and flashy features and you’ve found a house with good bones, you’ll be ready to act.

Visit HouseLogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.

How to Use Less Electricity When Your Electric Bills and the Heat Soar

By: Stacey Freed

Follow pro advice about how to cut your electric bills and use less electricity even with rising costs and summer heat.

The heat is on. Forecasts predict hotter-than-average temperatures across the U.S. this summer, with extreme heat likely in the Northeast and West, according to the National Oceanic and Atmospheric Administration. At the same time, electricity costs will hit a record 12-year high, says the National Energy Assistance Directors Association. The double whammy of soaring heat and electricity costs means you’ll want to know your options for how to use less electricity and cut your electric bills while keeping your home cool.

Why Are Electric Costs So High?

Basic economics says higher temps increase demand for electricity to run your air conditioning and blow your fans, leading to higher prices. Experts mention other possible culprits: energy companies covering capital expenditures to improve delivery infrastructure, more data centers consuming electricity, and tax cuts ending for alternative energy sources, placing more demand on fossil-fuel-powered plants.

Interpreting Your Electric Bill

Your electric bill shows the amount you’re paying to connect to the electrical grid, transmission fees, and various surcharges, along with the price of your electricity use per kilowatt hour (kWh). The average U.S. household uses 855 kWh of electricity per month, with an average price of 16.44 cents per kilowatt, according to the U.S. Energy Information Administration.

From June 2025 through September 2025, the average electric bill in the U.S. will be $787, up from $737 last summer and $660 only three summers ago, according to NEADA’s 2025 Summer Residential Cooling Outlook.

How to Use Less Electricity to Cut Bills and Cool Your Home

More than half of our energy use comes from cooling and heating, with about 18% of annual household electricity going to air conditioning, according to the EIA. As of 2020, 89% of U.S. homes used some type of air conditioning, and 67% have installed central air conditioning, according to the Environmental Protection Agency.

Here are 15 tips, listed from no-cost to higher-cost ideas, to cut your electric bill while cooling off:

Electricity Savings Tip 1: Manage Peak Demand

“Check your utility company’s rates,” says Sam Gluck, master electrician and vice president and partner at APCO Electric in Denver. “During peak demand, where I live, our energy company charges three to four times the typical kilowatt cost. Choose when you want to consume power.”

Electricity Savings Tip 2: Change Your Thermostat Settings

“This will depend, in part, on the region of the country you live in,” says Mark Wolfe , executive director of NEADA. “In states with very high summer temperatures, it’s recommended to keep your AC/thermostat between 70 degrees Fahrenheit and 78 degrees when people are at home, and to keep the AC/thermostat at 78 degrees when the house is empty. The utility company Carolina Comfort notes that for every degree increased between those two temperatures, you will save 3% on your electric bill.”

Electricity Savings Tip 3: Run Fridge and Freezer at Recommended Temps

“Running them at cooler temperatures might seem like a good idea in the summer, but that can drive up electricity costs and potentially wear out the electrical appliance,” Wolfe says.

Electricity Savings Tip 4: Clear Debris from Your HVAC System

Make sure nothing blocks the airflow from the system’s condenser. “That will affect how efficiently the unit can run, which will then affect energy usage,” Wolfe says.

Electricity Savings Tip 5: Close Indoor Window Coverings During the Day

Close your blinds or curtains to keep the cooler air inside during the day. If temperatures are low enough at night and the air quality is healthy, keep windows open for natural cooling.

Electricity Savings Tip 6: Follow Air Sealing Best Practices

“You want a tight building envelope [the building components that separate the indoors from the outdoors] and good ventilation, regardless of whether it’s heating or cooling season,” says Matt Daigle, CEO and founder of Rise, an online home improvement store focused on sustainability. Install door sweeps at the base of all doors from the interior of your home to the exterior and make sure all windows have functioning weatherstripping and all possible seams, cracks, and openings are sealed.

Electricity Savings Tip 7: Use Ceiling and/or Floor Fans

Fans don’t lower the temperature, but they do blow air across you, making you feel cooler. Running the fan counterclockwise in the summer pushes cooler air down.

Electricity Savings Tip 8: Change Your Air Filter Regularly

Wolfe says the frequency will depend on which type of filter and which type of thermostat/AC your home has, “but during the summer it should be monthly for most homes.”

Electricity Savings Tip 9: Schedule HVAC Maintenance to Boost Efficiency

A clean drain pan and clean drain line mean the unit will run more efficiently, so right before summer starts is the optimal time for maintenance. Have a professional check your ductwork for leaks and tears in the HVAC system.

Electricity Savings Tip 10: Reduce Solar Heat by Changing Window Treatments

In cooling seasons, about 76% of sunlight that falls on standard double-pane windows enters to become heat, according to the Department of Energy. Cellular shades can reduce unwanted solar heat through windows by up to 60%, reducing the total solar gain to 20% when installed with a tight fit.

Electricity Savings Tip 11: Use a Dehumidifier in Damp Rooms

It’s especially effective in rooms like the basement and bathrooms, Wolfe says. “The more humid your home is, the warmer you will feel.”

Electricity Savings Tip 12: Upgrade to a Thermostat That’s Easy to Program

Choose a smart thermostat or one that makes programming the HVAC system easier. “This could be a low-cost option for some people, but it may be costly due to the type of AC their home has and if it’s compatible with the newer technology,” Wolfe says.

Electricity Savings Tip 13: Boost Attic Insulation

Upgrade at a minimum of R-38, Wolfe says. Insulation is like your favorite insulated travel mug: It keeps hot contents hot and cold contents cold.

Electricity Savings Tip 14: Upgrade Your HVAC or AC System

“Choose devices with a high ENERGY STAR rating or switch entirely from window AC units to central air,” Wolfe advises. Although window units concentrate cool air in specific rooms, if they’re not installed properly, they allow heat in along the edges. New products are available that offer a different configuration and a tighter seal. Or install a heat pump — a device that heats and cools.

Electricity Savings Tip 15: Consider the Exterior

Install exterior shading, such as awnings and eaves, along the house, especially where there are windows. Plant deciduous shade trees along the south and west sides of the home.

What Electricity Costs Could You Be Overlooking?

Know how many devices you have. “Anything plugged in is drawing electricity,” Gluck says. Think about the iPhone charger that’s always plugged in, appliances, computers, and printers. “These are all consuming power even if they’re turned off,” Gluck says.

This “phantom energy” or “vampire power” can add up to 20% to your monthly electric bill. To help you figure how much electricity you’re using, you could buy an energy monitoring device that hooks up to your electrical panel and shows in real time where your biggest draws are coming from, Daigle says. You can buy an energy monitoring device at a hardware store for $20 to $50.

You could also unplug the devices you aren’t using or use power strips with a switch to turn off several devices at once. A smart plug allows you to use a phone app to help you turn gadgets on and off and monitor energy use.

Cut Electric Costs Long Term

Now’s the time to start preparing not only for this summer but for long-term extreme weather. Your cooling and heating system go hand in hand.

If you’re creating a more energy-efficient home and thinking of selling, you just may get a return on your investment. A 2022 report by Freddie Mac showed that more energy-efficient and higher-performance homes sold for 3% to 5% more than lesser-rated homes.

Visit HouseLogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.