Establishing a Good Credit History
Your credit history has more impact today than it did 10 years ago. After the mid-2000s housing crash, creditors are being even more discriminating about offering loans and they’re looking at your credit score and history with a fine-tooth comb. So, what can you do to ensure a great review from creditors when it’s time to buy a loan? Here are a few of our favorite tips:
Set up payment reminders – myfico.com suggests setting up payment reminders to avoid missing payments. A missed payment (one that goes 30+ days past its due date) can have a negative effect on your credit and your interest rate when you buy a home.
Pay down your debt – creditkarma.com says to keep debt to credit ratio below 30% for maximum score boost. This shows you have control of your debt by not maxing out all your balances and makes you a safer credit risk.
Check your numbers – credit.com recommends checking your credit report at least once per year. You can obtain a free credit report once per year, for each of the three credit bureaus. Check for mistakes and dispute any items that shouldn’t be there. “A 2012 study from the Federal Trade Commission found that 1 in 5 consumers had an error on at least one of their credit reports…”
Avoid credit inquiries– When you’re gearing up for a home purchase, you’ll want to avoid opening too many new credit accounts. According to experian.com new credit inquiries could be an indication that you’re taking on new debt, a red flag for lenders.
Payment history is the number one factor in determining your credit worthiness in almost every case. Making your payments on time can be the biggest boost or drag on your credit score. If you’re in the market to buy a home, catch up on delinquent payments and don’t miss anymore. If you’re thinking of buying down the road, start planning now and get your score as high as you can. These small changes can equal hundreds of dollars in savings every year on your mortgage.
If you’re ready to take the next step, contact us today. We’ll connect you with a mortgage professional who can show you what you need to do to be in a position of buying power!