If one of your future goals is to purchase a home, it’s never too early to start preparing yourself financially. One of the major factors that goes into getting approved for a home mortgage is your credit score and credit history. Your credit worthiness will determine what loan terms you qualify for. The following are steps you can take now to prepare your credit for buying a home in the future.
1) Establish Credit- In order to have credit, you need to start somewhere. For me, that was a credit card with a very low balance as soon as I turned 18. As you use it and make payments, you will be establishing credit.
2) Pay Bills On Time- It is imperative to only spend what you can afford and always make paying bills on time a top priority. Payment histories are one of the most important components that make up your credit score.
3) Keep Account Balances Low- Making payments on time is only one aspect of credit worthiness. The amount of outstanding debt, and the percentage of your available credit, are equally important. If you have credit cards that are maxed out, that will hurt your credit score even if you are paying the bills on time. Never exceed a balance of more than 25% of the total spending limit.
4) Check and Monitor Your Credit- 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.
5) Remove Old Items- If you have some old debts still showing on record, it may be simply expunged if enough time has lapsed. There are statutes of limitations, so debtors only have so long to take it to court. If they do not, the debt expires, usually after 7 years.
6) Pay Off Debt? Maybe, but maybe not. This depends on what type, how much, and how recent the debt is. Medical debt is treated differently than other categories. If something is small and recent, a payoff is a good idea. If a debt is older, it may not have much impact. Credit experts are helpful for complex situations.
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 lenders.
Is your credit really bad and not sure where to start? Some situations can be more complicated and you may want professional help. Guaranteed Financial Solutions is local company with a great reputation for helping people repair credit https://guaranteedfinancialsolutions.com/.
Great info on everything real estate.