For most of us, buying a house without a mortgage just isn’t an option so we must borrow the money to make this purchase and pay it back over a period of time. Part of qualifying for a mortgage is having a credit score that demonstrates that you will be able to make the payments on the money you borrow. When your credit score isn’t high enough, it could mean borrowing at a higher interest rate or even not being able to get a mortgage at all. If you know your credit score is a little on the lower side, here are a few helpful tips to increase your score before you buy a house.
Look at your credit reports
Did you know that you can order your own credit reports, once a year, without charge or a negative impact on your credit score? Most people don’t know that, either. If you aren’t exactly sure where you credit stands, contacting TransUnion and Equifax to have your credit reports sent to you is a great place to start. The reports will tell you all of the accounts currently open in your name, the outstanding balances (if any) and the credit rating each of those has.
Clean up your bill payments
If you notice you are behind on any accounts when you receive your credit report, this is the time to take care of them. It may have been a final balance that just didn’t get paid or a perhaps you thought you closed an account but didn’t. The credit report will also tell you who the account is with, so you know who to contact to take care of it.
Try to keep your credit use low
Most creditors like to see a total credit use of around 30%. If you’re maxing out all of your credit cards and lines of credit, then it shows a potential lender you may not have the financial means to support paying a mortgage. If you are using a lot of your credit, try to make it a priority to pay down the balances and free up the amount of credit you have available to you.
Try not to open new credit
When you apply for new credit – whether it’s a mortgage, a credit card, a car loan, or anything else – this is an inquiry into your credit. Too many inquiries will lower your score and could negatively impact your ability to get a mortgage. If you already have a credit card or line of credit, or both, in good standing, trying to just keep going with what you have while in the process of getting a mortgage could be really helpful.
Use credit monitoring
There are services you can subscribe to that will alert you whenever there is a change to your credit score. This will allow you to make sure you know exactly what is going on with your credit and make sure there isn’t anything opened that shouldn’t be.
If you are considering purchasing a home in the near future, then having a solid credit score will make that dream much more achievable. And if you have already been preapproved for a mortgage and are ready to start house hunting, we would be happy to help. Give us a call today to get started.