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Real Estate

What Improving Your Credit Score Does for Your Home Purchasing

When you set out to buy a home, you have many things to consider. For instance, you’ll need to think about what it is that you want in your new home: what features appeal to you, what you need in a neighborhood, etc.

But many of these items are moot points if your credit score is too low to even start the homebuying process.

In this article, we will take a look at the importance of improving one’s credit score before embarking on the process of purchasing a new home.

How is Your Credit Score Calculated?

 

In short, your credit score is a number between 300 and 850 (this can vary depending on which company you are dealing with). Lower scores on this spectrum indicate that loan borrowers are less likely to be able to pay their debts. Higher scores indicate a good likelihood that borrowers will pay off their debts.

In order to calculate this number, credit bureaus will take into account the amount of debt you’ve accumulated, your history when it comes to making payments, how much new credit you have, as well as other related factors.

Ways to Improve Your Credit Score

 

  1. Pay Bills on Time

Above all, you’ll want to demonstrate that you have a good history of paying off your debt. Making payments to credit cards and other bills on time and in the correct amount is one of the best ways to maintain and improve your credit score.

  1. Keep the Amount You Owe as Low as Possible

There are things you can control when it comes to your credit score, and things that you cannot control. When it comes to amount owed (or Debt-to-Income ratio), you may not be able to change your income significantly. After all, if only certain companies are hiring, they are going to pay employees whatever amount they decide upon.

However, if you can make any changes to your spending habits or lifestyle that will help eliminate even a small portion of your debt, you can influence this factor and, in turn, improve your credit score.

  1. Extend Credit Age

Lenders want to see that borrowers have long relationships with their credit card companies. Demonstrating that you’ve used a credit card for as long as possible signals to lenders that you are consistent and able to commit to a service. For younger borrowers, it’s impossible to influence your credit age very much. But for the future, it’s always best to keep credit cards open as long as possible.

  1. Don’t Open New Credit

Similar to the previous point, lenders are interested in working with borrowers who can develop long-term relationships and pay off their debts each month. Opening new credit frequently may signal to a lender that you are not responsible and are too reliant on using credit in general.

Mortgage Professionals Are Ready to Help You Today

You don’t have to go through this process alone. Mortgage professionals are ready and willing to work with you, regardless of your credit score. These experts can help you get into the home of your dreams. One group of these experts, Rex Homes, has provided additional information on their blog here: https://blog.rexhomes.com/how-to-improve-your-credit-score-before-you-buy

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