You're getting ready to purchase a house in the New Year. It's exciting, but you're panicking! There's so much to do before you pack, go house-shopping, put an offer on a home, and of course take the plunge into buying a new property.
However, one of the most essential things you can do to prepare for purchasing a home is improve your credit. We spoke with our preferred lender, Redwood Mortgage Services, to gather their top recommendations on how to accomplish this. Here are 5 of the best ways to boost your credit score and get into the house of your dreams!
Know Where You Stand
Your credit score plays a significant role in determining the kind of mortgage you will be able to obtain as well as the interest rate you'll qualify for. The higher your credit score, the better your loan options will be and the more money you'll be able to save on your new home purchase.
The best way to determine where your credit currently stands is to access your credit report. Credit bureaus are required to provide you with one free report per year.
Knowing your credit score and what is on your credit report can help you take action to improve your current standing.
Stuart Kiehne, President at Redwood Mortgage Services says, "Take advantage of that free credit report. If there are inaccuracies, it's best to address them sooner rather than later!"
When lenders and creditors see that you're proactive and vigilant about your credit, they'll be more likely to approve a loan for you.
Pay Your Bills On Time
Make a habit out of paying your bills on time. This shows that you're an organized person and that you prioritize your responsibilities. Things like rent, credit cards, current mortgage payments, and utility bills are all reflected in your payment history.
When lenders see this kind of on-time dedication, they know the borrower has good habits and they feel better about loaning them money.
Show creditors that you are responsible enough to handle financing from them. If you prove yourself as a reliable payer it can even help erase some negative marks on your report.
Don't Max Out Your Credit Cards
'Tis the season for shopping...but don't over do it. Many credit reports include information about how much you owe, which is referred to as your credit utilization ratio.
Your score can be negatively impacted if the amount you owe across all of your accounts or on a single card gets too high. In addition, carrying large balances from month-to-month will make it harder for you to pay off what you owe and stay within your means in general.
Kiehne recommends not using more than 30% of the total amount available on any one card.
Remember that paying down your debt can also improve your credit score by helping decrease how much you owe! If at all possible, try to avoid racking up new charges until after closing on the house.
Don't Fall Prey To Special Offers
Have you ever checked out at a store and had the clerk offer you a discount if you apply for a credit card? Or have you opened a piece of mail from Visa or Mastercard that states you were pre-approved for a particular card?
While it can be tempting to accept these offers, Redwood Mortgage Services advises their clients not to do it.
"Don’t apply for frivolous new cards, an extra 10% off at a department store. Forget about those offers!" says Kiehne.
No matter how enticing, opening another credit card right before applying for a loan is not a good idea. It can result in a hard inquiry on your credit report, which can ding your score a few points.
Maintain A Long History
The longer your credit history is and the more in-depth it is, the better it looks to lenders. So don't start cancelling old credit cards!
Kiehne says, "Leave older revolving accounts open. A longer history can help your score tremendously."
Keeping old accounts open and paying on them consistently helps demonstrate that you're not a risky prospect and can be counted on to make payments in the future.
Deal With Derogatory Marks
If you have any derogatory marks on your credit report, now is the time to address them.
"Take care of any delinquencies, liens, judgments or bankruptcies as soon as possible," Kiehne advises.
Lenders want to see that you're taking steps to improve your credit score and that you're not a high-risk borrower. If you can show them that you're making an effort, it will reflect positively on your application.
By following these five tips from Redwood Mortgage Services, you can put yourself in a much better position when buying a home. Improving your credit can save you money and help make the home-buying process go more smoothly.
If you need professional advice to further improve your credit score, contact the Redwood Mortgage team today at 410-266-1621 or by email at stuart@redwood-mortgage.com.
We have a trusted relationship and they can get you on track to homeownership quickly.
Want to get into your next home right away? Explore our quick-move in options that are available for your family now!