Improve Your Credit Score
The main consideration in a home-buying decision is financials. In order for a lender to see you as a good prospect, the first thing they look at is your credit score. No one is perfect, and even if your score isn’t ideal, you can (and should!) take the time to improve it before you start looking at prospective homes.
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- To see what your credit score is, request a free credit report from all three reporting agencies. Check each report for errors, and report them to both the credit bureau and company that reported it.
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- If there is a legitimate collection on your credit report, pay it as soon as you can, but it will not be removed from your credit history for seven years, although it will be marked as paid.
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- Old debt on your report that was paid in full and on time is better for your score than having it removed. So if you’ve paid off an account in good standing, leave it as long as possible.
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- If you have a history of keeping your payments on time, that’s great, because late payments hurt your score. Stay current by setting reminders to mail payments before their due date, or set up automatic payments through your bank.
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- Pay off your credit cards! This is so important, because the more outstanding debt you have, the lower your score. Pay off the smallest balance first, and the larger balances can be paid off sooner by increasing your payments, or send equal payments twice per month if the creditor allows.
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- Canceling a credit card that you’re trying to pay down sounds like a great idea, but it isn’t, according to FICO™. It’s better to simply pay off the card, and use it as minimally as possible--charging to it once a month for a take-out dinner keeps it active.
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- Don’t have a credit card? Shop around for one with a good interest rate, and apply. Having at least one credit account in good standing is better than none at all for those who haven’t really started establishing a credit history.
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- Applying for loans or credit with multiple agencies can hurt your score. Avoid new credit accounts while you’re trying to bring your score up.
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- If you are truly hurting financially, and don’t see a light at the end of the tunnel, contact a reputable credit repair agency that can assist you in getting your bills paid, manage your finances, and increase your home purchase chances.
There is no hurrying when it comes to improving your credit rating, so plan on taking several months to a year to bring your score up to a number that will impress lenders. It’s not all about the loan, it’s also about getting a good interest rate. Much like taking up jogging to get into shape, take it slow, increase your efforts every month, and you’ll soon be showing off the results!
Courtesy of New Castle County DE Realtors Tucker Robbins and Carol Arnott Robbins.
Photo credit: nationaldebtrelief.com
