It's Get Smart About Credit Day and a great time to remind you of the importance of your credit when it comes to buying a home. Lenders want to know you are able to pay them back in a timely manner. Your credit score is what tells lenders you have a history of paying back debts and making regular payments on time.
The better your credit history, the higher your score. The better the score the better the odds of you being approved for a mortgage, the amount of interest you will pay, what type of loan you qualify for and even how much you need for a downpayment.
Credit scores range from 300 to 850. According to FICO, A good score is 670 to 739, very good is 740 to 799, and 800 and up is considered excellent. So the question is, how do you improve upon this score? Well for Get Smart About Credit Day, Willow Bend Title has compiled a few tips to help get you started...
1.) Dispute Any errors
Get a copy of your credit report from Experian, Equifax and TransUnion and go through it to check for any errors. Common mistakes include duplicate credit accounts, which makes it look like you have more debt than you really do. You may also discover a missed payment you forgot about that you can pay and get cleared up. You may also see something show up that you know you paid that you need to dispute to have removed.
2.) Lower your credit utilization ratio
Even if you pay your credit card bills in full each month, you may still have a high utilization rate. Lenders will look at whether you have high balances on you credit cards. It is advised to keep the percentage of your total available credit used to below 30%, but those with the best credit scores keep their utilization at 10% or below.
3.) Avoid late payments
Your payment history is one of the main factors that affect your credit score, so paying your bills on time is very important. If you are just forgetful, it is advised to set up automated bill payments so nothing gets missed.
If you want the home buying process to go as smoothly as possible Willow Bend Title advises that you work to get your credit in tip top shape before getting pre-qualified. In the end, it will be easier to get approved for a mortgage and you will avoid spending thousands on interest over the life of your loan.
If you need to speak to a lender or have questions feel free to contact our team for recommendations. We are here to answer any questions you may have and help you reach the "American Dream" of home ownership.