The home buying process can be anxiety inducing with all the factors that are involved in it. Having a strong credit score is a very beneficial factor when applying for a mortgage and will help make the process less stressful. It helps show that you are good at repaying your loans and will help determine the type of terms you are likely to receive. If you are looking to improve your credit score, it is important to note that it won’t happen overnight. It’s a bit like losing weight, where it takes time and commitment since there are no “quick fixes”. The following tips will help you maintain the credit score that you have or help you improve it!
Use Your Credit Wisely
A good rule of thumb is to live within your credit means and to not exceed your credit limit. The 20/10 is a good rule of thumb for credit, which where you don’t let your credit card debt exceed more than 20 percent of your total yearly income after taxes. And each month, you don’t have more than 10 percent of your monthly take-home income in credit card payments. If you use more of your credit, lenders will see you as a greater risk, even if you pay your balance in full by the due date. The people with the best credit scores only use about 8 percent of their available credit!
Increase the Length of Your Credit History
The longer that you have a credit account open and in use, the better your score will be. The length of your credit history accounts for about 10 percent of your credit score. You should consider keeping older accounts open even if you don’t need it because this will give your credit report a longer record, which is good! Make sure there is no fee to keep the older account open and use it from time to time to keep it active.
Limit the Number of Credit Applications
Getting all of your rate shopping done within a two-week period will help you avoid having the inquiries impact your score. If you finish your rate shopping within the two-week period, there is a 30-day grace period during which inquires will not affect your credit score. It should also be noted that when lenders and others ask a credit bureau for your credit report, it is recorded as an inquiry. If you have a lot of credit check, lenders will either think that you are urgently trying to get credit or trying to live beyond your means.
Keep an Eye on Your Credit Report
Having errors in your credit report are more common than you might think. Credit reporting agencies, such as TransUnion and Equifax, offer a free yearly credit report. Take advantage of it and check to make sure there are no errors! Look over the credit report carefully and if you see an error, dispute it right away.
Chip Away and Reduce Your Overall Debt
If you have debt of any kind, take steps to help eliminate it slowly. Making a budget, limiting the amount of use on a credit card, and paying down your high-interest cards while still maintaining minimum payments on other debts will help improve your score greatly. Remember to always make your payments on time, even if a bill is in dispute. Can’t pay the full amount that you owe right away? Try to at least make the minimum payment or contact your lender if you think you will have trouble paying it, since this will help maintain your current score.
There are many ways to help maintain or improve your credit score, but the best it to make consistent and on time payments while also not overspending. If you have any questions about your credit score and how it will affect your mortgage application, drop us a line!
At Clinton Wilkins Mortgage Team, we can help you plan for the future and make the process of buying a home when retiring a little less stressful. Get in touch with us here and let’s discuss your future!