If you’re looking to make a major purchase, such as buying your dream home, you’ll want to check your credit report first and work to improve your score, if necessary.
Checking your report is important because many people find errors. Find out if there are ways to address the negative items to improve your credit profile and your chances of getting a mortgage, advises the National Association of Realtors.
Borrowers with high credit scores tend to qualify for lower interest rates on mortgages than those with low credit scores, according to BankRate.com, which adds that a credit score of 740 or higher qualifies for the best interest rates from most lenders. It is extremely difficult to get a mortgage with a credit score below 620.
Number one and most important is paying bills on time. According to credit reporting leader Experian having delinquent payments and collections negatively impact your credit score in a big way.
If you use credit cards and revolving charge cards, keep your balances low. The more you owe on each card the more it will negatively affect your credit score. NAR advises keeping your balances below 25 percent. At the same time don’t apply for more credit cards. Having more won’t improve your credit score, says Experian. Applications for credit show up as inquiries on your credit report, which may lead lenders to believe you want to take on even more debt. It’s better to use the credit you have to prove you are a responsible borrower.
Closing credit accounts will not improve you credit score, either. Having fewer credit accounts with the same balance as you had with more accounts will actually lower your credit score because it lowers your available credit, says Experian.
Improving your credit score takes time, but it’s time well spent toward your new home.
ReMax Real Estate Concepts
120 N 2nd Avenue West
Newton, IA 50208