Unless you have a lot of money stashed in the bank, you’ll need to secure financing before you start looking at houses. Lenders will check your credit score, income, debt, and savings when making a decision whether or not to approve your home loan.
While it’s still possible to secure a mortgage with low credit score, it will be the basis on what loans you will qualify for and the interest rate you will pay. If you are in the market for a new home, you want to make sure that you have a good credit score.
There are things you can do to improve your credit score. Here are some of them.
Check your credit report
Just because you settle all your bills on time and use your credit card wisely, there is no guarantee that you’ll have a stellar credit score. Sometimes, errors end up on your credit report; thus, affecting your credit scores.
The credit bureau allows you to get a copy once a year for free. To ensure that your credit report is error-free, secure a copy of your credit report and check it thoroughly. In case you find some inaccurate information, report it to the credit bureau immediately.
Don’t close old, paid off accounts
Some people are tempted to close their old accounts after paying off debt, thinking it would negatively affect their credit score. But if you do, then the card issuer will no longer send an update to the credit bureau. Eventually, it will be erased from your history.
The fact that you have paid off old debts can be good for your credit score. If you try to close your old account and expunge the record off of your credit report, your average credit age will be shorter and your credit score will drop. Leave old debt on your report.
Manage your debt
Having too much debt will have an impact on your credit score. To maintain a good credit score, your credit card balance should be within 30% of your credit limit. Even if you subsequently pay your credit card balance when your billing statement comes, issuers will report the balance when you charge more than 30% of your credit limit. Try to keep your credit card balances low. The higher it is, the worse your credit score will be.
Pay bills on time
Certain bill doesn’t get reported to the credit bureau when you don’t pay on time. But that doesn’t mean that you can delay payments. In order to improve your credit score, we highly recommend that you pay all your bills on time. Good debt is good for your credit.