The journey of buying a new home starts long before your physical search begins, and it is just as critical. Finances play a key role in your home search, so understanding what your credit score is and where you stand financially is important, before you even step foot in that new home.
If you’re looking to boost your credit score or correct errors to your credit report, following are some ways that will help to improve your score and get you in good shape to purchase that dream home.
Check your credit report.
This is basic, but the first step is to get and review your credit reports. Check over your entire report, from each credit reporting agency and look for any mistakes and errors that need to be corrected. There are several ways you can get a copy of your credit report, and under the FACT act you are entitled to a free report from each of the three nationwide credit reporting agencies each year: Equifax, Experian, and TransUnion.
Ask your real estate agent for a referral of a qualified lender who they would recommend for getting a credit report with scores related to obtaining a mortgage. This would be the best plan if you are ready to begin purchasing soon.
Once you have obtained your free credit reports following are some useful links:
Pay above the minimum on credit cards.
When possible, pay more than the minimum payment that is due each month. Making payments above the minimum is a great sign to anyone reviewing your credit before a big purchase, even if it’s only a small amount above the minimum.
Maintain a low balance on credit cards.
A major component of your credit score is the amount of revolving credit you have available to you versus the total balance that you owe. Best practice is to avoid carrying a balance over 50% of your card’s limit. The optimum amount is around 10% of your credit line for each particular card. Even better is to consider paying off and reducing the number of cards you use regularly. Instead of using several cards and carrying small balances on all of them, it is better to pay off the small balances and choose one or two cards that you use for everything. One thing to note, if you pay cards off, don’t close the account prior to your home purchase, paid off cards can reflect well on your credit score.
Pay on time.
One of the best things you can do to help your credit score is to simply make your payments on time, every month. Late payments not only hurt your credit score but can impact the type of loan for which you may qualify.
Avoid big purchases.
Any big purchase, like a car, boat, or expensive vacation can put a dent in your credit and alter your financial picture. Lenders do not like these kind of unexpected purchases that change your credit picture.
Leave old debt on your report, especially if it’s good debt.
After you have successfully paid off a car, home, or credit card, it’s a good idea to leave it on your report. Showing a past history of responsible credit debt is good for your credit and good for your credit score. It shows that you have handled your debt and obligations well in the past and is a good indicator of future repayment of debt. If you do have something in the past history that is not so stellar, check with your lender to see if it should be corrected, or if it should be left alone because it is not a recent item.
Check your credit report every year.
The best way to stay on top of your credit is to check up on your report at least once a year. That way, you can correct errors or get them removed as soon as they show up.
Buying a new home is so exciting, and taking care of your credit is one way of making it a bit less stressful when it comes time to arrange your financing.
If you’re in the market for a new home, I would love to help you find it. Today’s market in the Garland, Rowlett and Rockwall areas offers a wonderful array of opportunities for your new place. Please give me a call at 214-642-1375 or contact me here.