Video: 6 Ways to Improve Your Credit

Why Credit is Important

It’s very important to get your credit in shape before starting the home-buying process. Your credit scores indicates your ability to repay debts. They are also a fundamental requirement for mortgage lenders.

Your credit scores can also play a role in what it costs to borrow money. The higher your credit score, the more likely you are to get a good interest rate.

When your lender runs your credit report, it will generally show three scores, one from each of the major credit-reporting agencies: Equifax, Experian, and TransUnion. Your lender will use the median, or middle, score for the purposes of getting a home loan pre-approval.

 Credit score requirements aren’t as tough as they once were. But it can still be challenging for borrowers to secure financing. Conventional lenders often require a minimum 660 FICO score, but in order to access better interest rates, you will usually need to have a much  higher score.

VA Lenders usually accept a lower score, often around a 620 FICO. Additionally, credit scores have less impact on interest rates for government-backed loans.

What do you do next?

Create Good Money Habits

  • Staying on top of monthly payments: Start by building a history of on-time payments. Creditors don’t usually report late payments until they are 30 days past due. Your credit score can take a deeper hit if balances cross the 60-, 90-, and 120-day marks.
  • Keeping credit card balances low: Having high balances on multiple credit cards tells lenders you are pushing your creditand your finances to the limit. This is not a good place to be when you’re thinking about getting a mortgage. Try keeping your balances under 30% of your credit limit.
  • Avoiding making a lot of credit inquiries: Limit hard inquiries on your credit report. Multiple inquiries within a short period of time can be problematic and could cost you points as it can be viewed  as a sign of financial instability.
  • Avoiding opening and closing accounts: When you start thinking about buying a home, it’s best to avoid making significant changes to your credits. New accounts come with new monthly financial obligations that can impact into your house-buying budget. And while it’s usually a good idea to pay down credit accounts,  closing an account can actually lower your credit scores.
  • Taking care of unresolved issues: Unresolved issues on your credit report can complicate your chances of buying a home. Don’t leave outstanding balances unpaid, and work on resolving any matters of public record as soon as possible. Issues such as tax liens and landlord disputes will  damage your credit scores and they will  need to be resolved before you can close on a home.

Questions? We are happy to help. Call us at (707) 763-6290 or apply now.