We all know that a good credit score is a necessity to buy a home, especially with today’s lenders and their strict conditions to qualify for a mortgage.
Perhaps you previously owned a home and faced foreclosure or short sale and are now hoping to own a home once again. It’s not an impossible dream.
Perhaps you’re simply getting ready to buy a home, either for the first time or to upgrade/downsize a home you own.
If you have any questions about your credit score and qualifying you’ll want to make sure of a few things as you repair or establish your credit history. If you’re a first time home buyer you’ll want to make sure you approach the entire process knowing how to maintain a positive score or build a positive score in order to qualify with today’s lenders. In any case, today’s home buyers are facing stricter rules to qualify for a mortgage and your credit score is one of the major factors in being approved or denied.
Every agent tells you the first step is to prepare and this preparation includes knowing your credit score, knowing how much you can afford, and getting pre-qualified for a mortgage. If your credit score needs fixing it’s not impossible to do with some effort on your part. If you need to build a credit score up or keep your score high we have some quick tips to help you out.
How To Repair/Establish Your Credit
Here are a few things to take into consideration as a positive move towards repairing or establishing your credit in a positive direction:
- Pay down credit card balances – You want your credit card balances to be less than 1/3 of your credit limit for that card. Paying your card down even further than that by making extra payments, early payments, and even a little more than your minimum payment are all excellent ways to obtain this goal.
- Do not consolidate your credit cards into one card with one large balance – Having a few cards with smaller balances always looks best on your credit record.
- Keep your cards active with regular use – However do not overuse your cards. Using your credit regularly shows that you are responsible and helps you improve your credit rating by making regular purchases at least once a month and paying them off.
- Now is not the time to apply for new credit – It doesn’t matter whether it is a revolving credit card or an installment loan of any type, you want to remain as debt free as possible and applying for new credit won’t help your current situation.
- Don’t close out current credit accounts – You should not do this because it can actually delete the history of that account and will lower your available credit.
- Do not go over credit card limits – This is true even if your creditors allow for this to happen but with fees involved. Make sure you keep track of your available balance and never go over your limit.
- Remove charge offs and creditors that have you in collections – These can poorly affect your credit score. Instead of ignoring these debts contact your creditors and negotiate a payment plan if possible. In many cases older debts can be removed completed simply because of a statute of limitation.
Keep these things in mind when trying to repair your credit or establish a good credit history. Once you’ve established a consistent credit history, raised your credit score, and put away some money you’re on your way to owning a home.