If you’re looking to buy a home, you’ve probably already run your credit report. After all, your credit score and credit history are one of the biggest factors a lender will consider when granting you a loan.
A solid history and a high score? That will mean a great rate and an affordable monthly mortgage payment. A spotty history or a low score? You may have to wait a bit until that dream home can become a reality.
Fortunately, if your current credit status isn’t going to get you the mortgage (or home) you’ve been dreaming of, it’s not hard to change your cards. In fact, just a few months of hard work can significantly increase your credit score and make you more appealing to a lender.
Want to get your credit in a good place for homeownership? Here are 6 ways to clear it up – and fast.
- Start paying on time. A big factor in your credit score is your payment history – and that includes how many payments you made on each account and whether you made those payments on time according to the creditor. If you want to improve your credit score quickly, start paying your bills and accounts on time – or even early if you can. You want lenders to see that not only can you afford a mortgage, but that you can be trusted to pay it on time every month, too.
- Pay your debts down. Start making a dent in any outstanding debt you owe. If you can, avoid just making the minimum payment, or even try to make more than one payment a month, if it fits better with your income schedule. The less debt you have the next time your credit report is run, the better your score will be.
- Handle revolving credit first. Revolving credit impacts your credit most, so if you have to pick and choose, focus on these accounts first. Revolving credit includes credit cards or any lines of credit that renew once you pay them off.
- Look for errors. Credit reporting agencies aren’t perfect, and often, they make some serious mistakes. Always check to make sure your report is correct in every way possible. Look at your personal data, your account information, your account balances and more. If you see any errors, dispute them with the agency. You want that cleared up as soon as possible.
- Aim for a 10-percent usage. To get the best credit score, aim to use only 10 percent of the total credit you have available. That includes all credit cards, loans, lines of credit or any other accounts you have open. Though you can still have a good credit score with more usage than this, make 10 percent your goal as you start to clear up that credit history. You’ll get there eventually!
- Ask for a limit increase. Not sure you can get to 10 percent? Consider asking your credit cards or other accounts for a limit increase. Let’s say you owe $500 on a credit card with a $2,000 limit. Currently, you’re using up 25 percent of your available credit. If you’re able to increase that limit to $5,000 or more, then suddenly, you’re only using 10 percent – but you still owe the same amount! It may not help you pay down your debts faster, but it can be a nice way to improve your credit score in a pinch. Just be careful not to use the increase as an opportunity to go on a spending spree. You want it to help you, not hurt you!
In addition to using these tips, be sure to not add any debt to your name while you’re trying to buy a home. Avoid big purchases, and instead focus on paying down your current debts, not adding any more to the list.
Check Before You Shop!
It’s always important to check your credit before diving into the homebuying process. Your credit will play a huge role both in your mortgage application, as well as in the type of home you can afford. If your credit isn’t as great as it could be, consider taking a few months to get it up to par before listing your home or searching for properties. The better place your credit is when you start, the easier the process will be!
Want more help getting ready for the homebuying process? Just want someone to guide you along the way? Contact the expert agents at The Claus Team today. We can help you every step of the way.