Are you planning to buy a house?
Before stepping towards your dream, we recommend getting a free copy of your credit report from Experian or any other credit reporting agency to know your credit score.
This will help you determine whether you are eligible for a mortgage and if you can secure a low-interest rate on the loan.
Here’s a brief look at different credit score ranges:
- 800 to 850: Excellent
- 740 to 799: Very good
- 670 to 739: Good
- 580 to 669: Fair
- 300 to 579: Poor
You need to be in the “Very Good” range to afford your monthly payments based on your budget. Now that you know what you are aiming for, let’s take a look at some tips on how to improve your credit score:
Pay Bills on Time
Late payments stay on your credit report for at least seven years. If paying a bill takes more than 30 days, call your creditor immediately and inform them before they report it. Give them a deadline, and pay the bills when your next paycheck arrives.
Pay Down Credit Balance
A rule of thumb regarding credit utilization is to use only 30% of your credit. This way, the impact will be minimal if you do get late in making the payment. High credit score holders use just 7% of their credit, lowering their burden at the month’s end.
Use a Secured Credit Card
As the name says, a secured credit card is backed by collateral, usually a cash deposit matching your credit limit. If you miss a payment, the amount is automatically deducted from the deposit, keeping your credit score up and up.
Mistake happens, even from the credit reporting agency’s side. Hence, you must save all your receipts and pay stubs to tally with your credit report if a payment appears unpaid. In this case, all you have to do is write an email to the agency with proof showing that a mistake has been made. The agency will investigate and rectify the mistake within a few days.
Don’t Open New Accounts
When you open an account, the bank does a hard inquiry into your credit history, which lowers your credit score by 5 points. Even this small drop has a huge impact on your loan eligibility. If you have applied at multiple banks, the dropping score can add up quickly and push you from the Good to the Fair range.
A great way to lower the interest rate on your mortgage is to collect 20% for the down payment. This will help you secure a loan within a month or two instead of waiting a year to improve your credit score. Megan Dowdy Realty will help you contact a qualified Dr. Phillips realtor with connections to lenders who might be willing to give you a loan at an affordable rate. For more information, call 407-509-9279.