One of the biggest factors when securing a home loan is your credit score. It’s pretty common knowledge that credit scores are important, but what exactly is it? And how can I make it better?
What is a credit score?
Your credit score is a number that reflects how trustworthy you are to pay on your credit card, bills, and loan amounts. There are three bureaus that calculate this: Equifax, TransUnion, and Experian. The higher your credit score is, the more likely you are to pay your bills on time, making you less of a risk to potential lenders for credit, mortgages, or other loans. Credit scores range from 300 to 850.
How do I find out my credit score?
The bureaus listed above are required by law to provide a credit report to you twice a year upon your request. Additionally, some credit statements provide a FICO credit score. Personally, I also check on creditkarma.com. You put in your information, and it pulls up two of the bureaus current credit score. Plus it’s free and you can check it weekly!
How does this affect me buying a a home?
If you have a lower credit score, you are more likely to have a difficult time to be approved for a home loan. If you have a higher credit score, you could qualify for lower interest rates. Good credit scores are typically around 620-700 and excellent credit scores are higher than 700. If you are right at 620 though, doesn’t necessarily secure you the best interest rate from the government. If you are borderline good credit, it may bring you to a higher interest rate than the government’s prime rate.
How can I fix my credit score?
There is no easy answer to this question. It will take time to sort out the issues that are keeping you from having the best credit you can.
If your report shows missing payments or an open claim… contact the reporting agency to get the item removed off the report (assuming it is a resolved issue).
If you have a history of making minimum payments, or paying late… make an effort to pay the balance off each month, and on time. This has a big effect on your overall credit score.
Other tips to improve your overall credit trustworthiness:
- refrain from opening too many credit accounts, if you’re rebuilding or establishing credit history.
- pay remaining balances on accounts, and keep revolving credit balances low
- if it has been awhile since you’ve had a credit limit increase, contact your credit company. Having a higher credit limit helps keep your utilization level low, which is beneficial to keeping healthy credit.
Credit is just the beginning of securing the home of your dreams. To learn more about credit scores, mortgages, or buying a home in the Denton County area contact Sherry.
