Improving Your Credit Score to Buy a Home
Along with your overall income and debt, credit scores are a BIG factor when it comes to obtaining a mortgage loan and what your loan terms will be. What if your credit score could use some improving? If so… is it possible to learn how to fix your credit score enough to buy a home?
The answer is yes! Here are 8 tips on how to improve your credit score to buy a home:
1. Check for errors.
Mistakes in your credit report can happen! You could be paying for someone else’s poor financial management, who knows. Check for and do your best to correct any errors.
2. Pay down credit card bills.
If it’s possible, do your best to pay off the entire balance of your credit card every month. Tip: Transferring credit card debt from one card to another could lower your score, so that’s not a route you want to take.
3. Don't charge your credit cards to the maximum limit.
Make an effort not to use more than 30% of the total card limit.
4. Wait 12 months after credit difficulties to apply for a mortgage.
After one year, you’re penalized less for problems in the past. This is one reason why it’s a good idea to plan ahead if you’re going to buy a home!
5. Don't order items for your new home on credit… until closing.
Large purchases like furniture or appliances can wait! These large ticket items will just add to your debt and affect your debt to income ratios. It can be tempting to buy that amazing sofa for your new living room, but just wait until the home is officially yours.
6. Don't open new credit card accounts before applying for a mortgage.
Having too much available credit can actually lower your credit score.
7. Shop for mortgage rates all at once.
Having too many credit applications can lower your score. However, multiple inquiries from the same type of lender can be counted it one inquiry if submitted over a short period of time.
8. Avoid finance companies.
Even if you will pay the loan on time, the interest is always too high, and will probably be considered as a sign of poor credit management.