Lenders check out your credit score to find out whether or not they will approve for you to get a home mortgage. And a bad credit scores can be a BIG deal! Lenders want to know that you can repay. Increasing your credit score can take time.
Credit scoring looks at 5 factors:
- Your Payment History
- Amounts you owe
- Length of your credit history
- types of credit used
- your new credit
So if you are ready to buy a house or not, now is the time to fix your credit score. Here are 6 tips on making those numbers look healthy!
- Pay off debts. This is the most important and hardest tip. The minimum monthly payment won’t cut it! Make a budget, cut the fast food, do what you must– but pay it off!
- Always pay your bills on time. Cellphone, electricity, water, credit cards, car payment, everything… Late payments play a huge role in bringing the score down.
- Keep Credit card balances low. Having a high debt-to-credit ratio will hurt your credit. Consumers with the best credit scores have balances that are less than 10% of their credit scores, so aim to get your balances to that point or lower.
- Leave old accounts open and keep them active. Credit age is important when it comes to your credit score. Your credit score considers both the age of your oldest account and the average age of all your accounts. Keeping old accounts active helps you have a mature credit age.
- Don’t open several new lines of credit in a short amount of time. That is a red flag that you might not be able to handle credit responsibly.
- If you have never had a line of credit open, it might be a good idea– As long as you are responsible with it. It might be hard to get a loan if you have never ever had any credit of any type. So prove to the bank that you can handle it. Consider getting a credit card. Use it wisely and pay it off every month in full.