8 Tips to Improve Your Credit and Get a Better Home Loan
One of the first stops on the road to homeownership is figuring out your finances, and that includes understanding your credit - a critical piece of the buying puzzle.
“Whether your credit is in need of an overhaul or you’re looking to preserve your stellar score, now is the time to address your creditworthiness so you can position yourself to get the best home loan at the best rate,” says Stevens.
According to Paul Stevens, CEO of Just Property, good credit often opens the door to success when it comes to buying a home, and, unfortunately, bad credit can close it.
“Whether your credit is in need of an overhaul or you’re looking to preserve your stellar score, now is the time to address your creditworthiness so you can position yourself to get the best home loan at the best rate,” he says.
Steven provides eight steps to help you solidify your credit score:
1. Get a copy of your credit report
If you don’t have a current one, get your credit report now - you need to be aware that problems exist before you can solve them.
Serious issues, and sometimes even minor ones, can take months to repair. There are a variety of ways to get your report, and you’re entitled to a free one from each of the credit bureaus once a year.
2. Mistakes happen - get them fixed
Every year, a whopping 25% of people who get declined for a home loan had errors in their credit report.
When you spot them, it’s up to you to fix them. Your report should have step-by-step have instructions on how to complete the credit form. Follow them to a T, and keep a good record of your dispute, including copies of any documents you file with the bureaux.
Once you make an initial claim, you should get a response within 30 to 60 days.
3. Stay current - pay your bills on time
It sounds obvious, but if you’re looking to increase those scores over time in a clear and steady upward climb, never miss a payment - ever.
4. Pay over the bottom line
If you think you can get your credit spruced up and ready to go in a matter of days, think again. Even without any dings on your report, you’ll want to make sure all your credit cards are paid up prior to qualifying for a loan, and that requires planning, says Stevens.
Another credit building tip is to always make more than the minimum payments on your revolving credits each month.
A history of minimum only payments is not a positive indicator for anyone reviewing your credit report. Always pay more - even if it’s just a little bit. Not only will you be chipping away at your balances faster, but you’ll save money on the total amount of interest handed over to your bank.
5. Maintain low balances
Some say the best way to keep you score afloat is to avoid carrying a balance that’s over 50% of your limit on each card, so pay those debts down below that halfway mark as soon as possible.
6. Don’t move it, lose it
It is important to pay off the debt on your existing credit card, instead of simply moving it to another card.
The credit card companies have caught on to consumers who try to reduce balances by shifting them back and forth between cards, and while they’ll still let you do it, they’ll charge you a large fee.
Incurring the extra cost is simply not worth the benefit. You’ll pay off debt quicker - and you’ll have less of it - if you just work hard to pay off what’s on the card you already have.
7. Buying a car can put a dent in your credit score
It’s best to avoid any big changes to your finances right before a home purchase. That means no big purchases on credit, like buying a car or charging an expensive vacation.
Any significant buys can alter your financial picture, and banks don’t like to see sudden changes just before approving a loan.
8. Plan ahead
If you think you can get your credit spruced up and ready to go in a matter of days, think again. Even without any dings on your report, you’ll want to make sure all your credit cards are paid up prior to qualifying for a loan, and that requires planning.
Get ahead of the game by paying down your debt, then try and lock up your credit cards until your credit score has been checked and you have been approved for your mortgage.
Stevens says they understands that nothing is more central to your happiness than the spaces in which you live, work and play.
“We are focused on discovering new and unexpected opportunities that open doors for clients and all prospective homeowners,” he says.