Improve Your Credit Score Before You Purchase

The journey of purchasing a new home starts long before your physical search begins, and it is just as critical. Finances play a key role in your home search, so understanding what your credit score is and where you stand financially is critical, before you even step foot in that new home.

If you’re looking to boost your credit score or correct errors to your credit report, following are some ways that will improve your score and get you ready to purchase that dream home.

1. Check your credit report. The first step is to get and carefully review your credit reports. Check over your entire reports and highlight any mistakes and errors that need to be corrected. There are several ways you can get a copy of your credit report, and under the FACT act you are entitled to a free report from each of the three nationwide credit reporting agencies each year: Equifax, Experian, and TransUnion.

You can take advantage of this free credit report at annualcreditreport.com or if you are purchasing or refinancing within the next six months I would recommend talking with me directly at 214-770-1499 or reaching me via email at jim@mortgagebyjim.com. We can then schedule a time to talk and obtain a full credit report as well as determine what if any strategy is needed to improve your credit score.

Annual Credit Report | Mortgage By Jim

Once you have obtained your free credit reports following are some useful links:

2. Pay above the minimum on credit cards. When possible, pay more than the minimum payment that is due each month. Above-the-minimum payments are a great sign to anyone reviewing your credit before a big purchase. Even if it’s only a small amount above the minimum, it is a good practice if you’re carrying a balance on a card.

3. Maintain a low balance. A major component of your credit score is the amount of revolving credit you have available versus the total balance you are carrying. It’s best to avoid carrying a balance over 50% of your card’s limit. The optimum is 10 percent of the credit line. Even better is to consider paying off and reducing the number of cards you use. Instead of using several cards and carrying small balances on all of them, it is better to pay off the small balances and choose one or two cards that you use for everything. One thing to note, if you pay cards off, don’t close the account prior to your home purchase.

4. Pay on time. One of the best things you can do to keep your credit score where it should be is to simply make your payments on time, month after month. Late payments not only hurt your credit score but can impact the type of loan you may qualify for.

5. Avoid big purchases. Any big purchase, like a car, boat, or expensive vacation can put a dent in your credit and alter your financial picture. These dents are sudden changes that lenders don’t like to see right before a major home purchase.

6. Leave old debt on your report, especially if it’s good debt. After you have successfully paid off a car or home, it’s a good idea to leave it on your report. Showing a long history of responsible debt is good for your credit and good for your credit score. It shows that you have handled your debt and obligations well in the past and is a good indicator of future repayment of debt.

7. Check your credit report on at least an annual basis. The best way to stay on top of your credit is to order a copy of your report at least once a year, and get any errors corrected or removed as soon as they show up.

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