1. Check and update your credit report: Consumers are guaranteed at least one free credit report a year; get a copy of yours to see where you stand. If you find errors, you can contact the creditor or the bureaus to address any invalid information.
2. Make payments on time: Your credit report shows your current creditors and your payment history with them. Payment histories are one of the most important components of your credit score, so it’s important to maintain on-time payments with all of your creditors.
3. Pay down high accounts: Making payments on time is only one aspect of credit worthiness. The amount of outstanding debt, and the percentage of your available credit that is outstanding, are equally important. If you have credit cards that have been maxed out that can affect your credit score, whether you’re making payments on time or not. Focus on paying down accounts with the highest percentage of credit used. Getting these outstanding balances below 25% of the available credit line can improve your credit score.
5. Avoid opening new accounts: New accounts can be a red flag – lenders want to see a history of payments, and new accounts mean you have a new need for credit. However, if you don’t have credit yet, this is an exception. A couple of credit cards with low balances and on time payments often times can appear better than no credit cards at all. But, avoid making a big purchase like a car just before applying for a home loan – a recent large purchase can alter your overall financial picture.
6. Talk to a lender and get pre-qualified now: This will help you understand how much home you can afford, and what steps you can take to increase your purchasing power. If there are any issues with your credit history or your credit score, the lender may be able to show you what you can do to improve your situation.
Taking steps in advance to improve your credit score will help ensure lower rates and better terms which may mean huge savings for you during the life of your home loan. When you’re ready to explore your home loan options, contact me and I can recommend great local mortgage people. Is your credit not great, but not sure where to start? Some situations can be more complicated and you may want professional help. Garranteed Solutions is local company with a great reputation for helping people repair credit. Check out their website for tons of good info http://garranteedsolutions.com/.
Originally posted by Beazer Homes 11/3/14; Rewritten and edited by Lisa VanderLoo 11/6/14