What Your First-Time Homebuyers Might Not Know About Credit

As a real estate agent, you likely hear it all the time:  

“My credit is fine.”  

“I pay everything on time.”  

“I’ll just worry about that once I find a house.” 

Credit Is More Than a Score; It’s the Full Story

While none of these statements are wrong, they often miss key points, especially for first-time homebuyers. Credit plays a much bigger role in the mortgage process than many buyers realize. A little education early on can make the difference between a smooth transaction and a frustrating delay. 

Here’s what many first-time homebuyers don’t know about credit and how you can help them get ahead:

Why Two Buyers With the Same Credit Score Can Get Different LoansA buyer can technically have a “good” score but still face problems if their credit report shows maxed-out cards, recent large purchases, or inconsistent usage. This is why two buyers with the same score can receive very different loan options. Helping your clients see that credit is a story, not just a number, sets expectations early and builds trust. 

Paying Down Debt Can Matter More Than Paying It Off

This surprises many first-time buyers. Paying off a credit card completely isn’t always necessary and sometimes isn’t the best choice. What matters most is credit utilization, or how much of their available credit they’re using. A good rule of thumb is to keep balances below 30% of the credit limit, with under 10% being ideal. 

A Simple Credit Utilization Example That Can Boost Scores Fast

If a buyer has a card with a $5,000 limit and a $4,500 balance, simply reducing it to $1,000 could result in a noticeable score increase, often faster than closing the account or paying it off entirely. Small, strategic moves like this can make a big difference in a short time. 

Timing Matters More Than First-Time Buyers Expect

First-time buyers are often surprised to learn that credit changes right before or during the homebuying process can hurt more than help. 

Opening new credit cards, financing furniture, buying a car, or even co-signing for someone else can affect their debt-to-income ratio and credit score. Even inquiries can temporarily lower a score. 

One Rule That Prevents Last-Minute Underwriting Issues

A simple message agents can reinforce: If you’re thinking about buying a home, hold off on major financial moves until after closing. That advice alone can prevent last-minute underwriting issues.

On-time payments are essential, especially before a purchase. While this seems obvious, it’s worth reminding clients. One late payment, even by a few days, can significantly lower a credit score, especially for buyers with limited credit history. Encouraging clients to set up autopay (at least for the minimum payment) can protect their score during this crucial time. Consistency matters more than perfection. 

Why Closing Old Accounts Can Hurt First-Time Buyers

Credit history is often a hidden factor. Many first-time homebuyers think closing old accounts is a smart cleanup move. In reality, closing long-standing accounts can shorten their credit history and reduce available credit, both of which may lower their score. 

Unless an account has an annual fee or is causing issues, keeping it open (and used lightly) can be beneficial. Sometimes the best move is to do less, not more.

Talking to a lender early means fewer surprises later. One of the best things you can do as an agent is to encourage buyers to consult a trusted lender before touring homes. A lender can perform a soft credit review (meaning it won’t negatively impact your score), identify quick improvements, and create a plan that fits the buyer’s timeline.

Great Agents Help First-Time Homebuyers Avoid Credit Mistakes

This not only assists the buyer but also protects your deal, your time, and your reputation. When your clients understand credit sooner, they’re more confident, better prepared, and less likely to face challenges during the transaction. You also position yourself as more than just someone who opens doors; you become a true advisor in one of the biggest financial decisions of their life. 

First-time buyers don’t expect you to be a credit expert. They expect you to guide them to the right resources and help them avoid common mistakes. That’s where great agents stand out. 

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At Gershman Mortgage, communities, families, and homes are at the heart of what we do. Built on the core values of honesty, integrity, entrepreneurial spirit, and customer-first service, we’re committed to providing an exceptional homebuying experience. Our goal is simple: to exceed expectations and build lifelong relationships.

NMLS #138063 16253 Swingley Ridge Road Suite 200 Chesterfield, MO 63017 (800) 457-2357 Equal Housing Lender. Serving borrowers in: Alabama, Arkansas, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Wisconsin

Written by Kaylee Larson for Gershman Mortgage