Want to Improve your Credit Score so you Can buy a home

January 12, 2017

Buying A Home? How to Improve your Credit Score

Want to Improve your Credit Score so you Can buy a home

Want to buy a home but find that your FICO score is not what you want it to be, or what it should be to get you the best loan possible? Here are some general areas you should pay attention to give your credit the best opportunity to improve.

Always Pay  On Time

Every lender or creditor wants to know they will be repaid, and repaid on time. Not paying on time shows a lack of discipline or that you have poor money management skills. If you have a history of missing monthly installments, you will end up with a lower FICO score. Paying on time is the key ingredient to improving your credit score.    It can carry up to 40% of the weight on your score. Be sure to pay the full payment and pay it on time.

Keep the Credit Low

A good rule of thumb – DO NOT have outstanding unsecured credit above 50 percent of your annual salary. Try to keep your credit card balances at less than half the allowed limit. For example, if you have a credit card with a $5000 limit, try to keep the balance at $2500 or below.

Two Credit Cards

If you have two or more credit cards, be sure you don’t charge to the max on one, or go above the 50% available balance. It’s better to have 2 credit cards, keeping the balances of each below the 50% of available credit limit.

What kinds of loans?

It’s good to have a mix of loans. You don’t want all “credit card” loans. A mix of home, auto, and credit loans is what is a good mix. Be sure to pay off personal loans, credit cards, and private loans first. They usually have higher interest rates. Home loans tend to have lower interest rates and are considered an asset.

CLOSE SAVINGS ACCOUNTS

Many times people leave savings accounts open and forget to close them. If you have less than the minimum average balance in the account, it may affect your credit score. When you pay off a loan, be sure to get the loan closure certificate so you have proof it was paid off.

CREDIT REPORTS

It’s good to check these periodically. You can get them online to check your credit score and be sure that there are no errors on the report or fraudulent activity.

Can’t Pay on Time?

If this is the case, be proactive. Call the creditor to let them know in advance that you cannot make the payment. Do your best to negotiate an agreement payment solution or extension. Good communication is always a beneficial practice to follow.

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