Before you begin your real estate search, getting your credit in shape should be a top priority. Even if you have no immediate plans to purchase a home, you should still take steps to improve your credit so that you’re ready to act when the time comes.
If you’re nowhere near ready to buy a home, why is it important to pay attention to your credit? A low credit score equals a higher interest rate, which equals more money spent over time. As a worst-case scenario, a low credit score could even prevent you from qualifying for a mortgage at all!
Raising your credit score takes time, so if you start now, you’ll be in a good position when it’s time to apply for a mortgage. Here are some of our favorite tips to help our clients improve their credit:
- Review your credit report annually.
Did you know you can request a free credit report once a year? This is a great way to see where you stand and review your report for fixable errors that could impact your score.
- Pay your bills on time.
Your bill payment history accounts for approximately 35% of your credit score. Get those mortgage, rent, and credit card payments submitted on time to prevent a serious blow to your credit score.
- Pay your credit card balances in full.
If this tip is tough to swallow, try to pay more than the minimum payment to knock your balance down faster.
- Keep your utilization rate at 30% or less.
Your utilization rate is your total credit card balances divided by your credit limits. If all of your credit card balances added together equal $3,000 and your limits total $10,000, your utilization rate equals 30%.
- Keep your credit accounts open, even if you’re not using them.
A long history of making credit payments on time reflects favorably on your credit report. Even if you are not currently using some of your lines of credit, you might want to keep them open to demonstrate your creditworthiness.
- Don’t apply for credit during the home-buying process.
When you apply for a new line of credit, it temporarily lowers your credit score. Avoid taking out other loans or applying for credit cards when you’re in the thick of your real estate search.
Do you have credit concerns? Contact MortgageDepot today to see how your credit score affects your mortgage eligibility!
Connect with one of our loan consultants to learn more.