Your credit score is a big factor in determining your ability to qualify for a mortgage loan. Many first-time homebuyers believe that they need a 'perfect' credit score in order to secure financing. This is a misconception, there are home loans available that only require a minimum of a 580-credit score.
However, the better your score, the better your chances are of getting a favorable loan and potentially better interest rates. Knowing your credit score is one of the first steps to securing a home loan mortgage. To be sure the data on the report is accurate, look for errors, omissions, and fraudulent accounts. Having items listed on your credit report that are not yours can negatively affect your credit rating.
Here are a few tips to get you started on improving your credit score:
- Pay your bills on time. Enroll in a bill management program to help you. Some banks offer similar programs through email and text alerts.
- If you don’t have a credit card, get one. Lenders like to see regular credit card payments. Do your best to make the minimum payments (more if you can afford it) and stay below your credit card limit.
- Keep any credit card accounts that have excellent history. Be sure to use them strategically, keeping your balance below 30% of their limits and only for small purchases that you can easily pay off in full at the end of each month
- Cut your debt-to-income ratio. It can be painful to eliminate those daily lattes or coffees but paying off your debts should be priority number one.
The great thing about credit is that no matter where you stand, you can improve your number — it is never permanent. However, rebuilding your credit will take some time, follow the tips listed above and you'll be on your way to improving your credit score.
For additional information and tools to help improve your credit, speak with a GO Mortgage Home Loan Advisor today!