The overwhelming majority of homeowners rely on help from a lender when purchasing a home, often in the form of mortgage. Consequently, it is essential for prospective homebuyers to have a strong credit score to not only apply for a mortgage; but also to obtain their mortgage at favorable rates.
A credit score is based on a variety of factors, including your history of paying off debts; how much debt you owe; the length of your credit history; the type of credits owed and if you have any recent credits. The tracking process begins the first time you took out a credit card, or borrowed money in the form of a car or student loan, for example.
Fortunately, there are several tactics prospective homeowners can do to improve their credit score before they begin the process of purchasing a home. Let’s take a look at 4 ways you can improve your credit score and receive a favorable mortgage rate.
1) Always try to pay your bills on time, but if you have fallen behind on payments, try to get up to date on the unresolved debt. Failing to do so could lead to collection agencies calling you, and the longer you allow the issue to stem, the worse off you will be. Delinquent payments will always be part of your credit history; however, it won’t be as glaring as time moves on. Alternatively, not taking care of the issue will leave the omission near the top of your history, which will surely scare off some lenders.
2) Do not close off your credit card accounts. When people get in trouble with a credit card, they often pay off their debt, then choose to close the card in order prevent another slip up. However, keeping the card, with a “0” balance can actually help improve your credit score. Also, keep in mind to always try to keep your monthly credit card balances as low as possible, as high balances could adversely affect your score.
3) Try to avoid opening several new credits in short timeframe. Less is more, as you want to show you are on top of your credit, and several new credits will likely harm your score.
4) If you request a copy of your credit report, be sure to meticulously examine it, as there could be an error that is unjustly hurting your score. Plus, taking a close look at your score will ensure you are not a victim of identity fraud, or a victim of a company taking advantage of you.
This is just a small snippet of tips that can help you improve your credit score. Taking swift action and formulating a plan can help you save a ton of money the next time you need a loan, especially if you plan on one day being a homeowner. For a better idea of what those savings could entail, take a look at the infographic below.
Post by Alexis Hlady
