Top ways to improve your credit score to buy a home
Buying a home is more than just waking up one day, deciding to look at houses. Buying a home is something that takes months, if not years to plan for and build up to.
Something that can harm most first time home buyers, or any home buyer, is a poor credit score! A credit score is three little numbers with a big meaning. Our score is what tells others about how we deal with debt and how we are with our money. Even people that have the income, who make every payment in cash can have a poor credit score.
Most people don’t give their credit score much of a thought until they need to make a big purchase or take out a loan. For most of us, a home is the largest investment that we will ever take a loan out for.
When it comes to financing, a low credit score could cause:
• Higher interest rates
• More time needed to approve
• Require more proof of income
• Need to have a bigger down payment
• Option of no financing at all
Don’t be caught in the stress of trying to buy a home with bad credit… start improving your credit today with these tips:
Score- First things first, you need to see what your credit score is! If you haven’t checked your score in years, you might be in for a big surprise.
Fees- According to the federal government, you are allowed 3 free credit checks a year. You can get this information online, but beware, many sites (not federally ran) may try to charge you for this report. Don’t fall victim to their trap!
Balance- While knowing your score might be the first step, but this tip is easily the most important. Paying down what balances you have on all open credit cards is the biggest step in getting a better credit score. It is okay to use one of your open cards, but always make sure to keep your monthly balances as low as possible.
Pay On Time- If you really want to boost your score, this is the best way to do it! While it may be easier said than done, it is important to make sure all payments to every credit card and loan you have are done on time.
Card Usage- As we said above, pay off all your credit cards…But don’t close any of them until you have applied for your mortgage. Sometimes closing cards can have a slightly negative effect on your credit. Paying off cards but keeping the line of credit open can make your mortgage chances better
Open new accounts- opening a new credit card can improve your credit score! If you don't make any new purchases on your credit cards, including the new one, your overall credit utilization will drop and your credit score could increase.
Big Buys- Don’t make any other huge purchases before you apply for a home loan. This includes going on a large vacation, buying a car, or any other large ticket item. Large charges can make your credit look weak.
Planning- Changing your credit score is not something you can do overnight. Credit repair can take months to repair. So be patient and plan ahead!