Getting and maintaining a good credit score
A credit score is one of the most important factors lenders consider when determining whether to approve a mortgage loan for a potential home buyer and the loan terms the home buyer will receive. A good credit score goes a long way to help qualify for a lower interest rate and better loan terms, which can ultimately save the home buyer thousands of dollars over the life of the loan.
On the other hand, a poor credit score will make it difficult to qualify for a loan or could result in higher interest rates, which can significantly add to the cost of home ownership.
From the lender’s perspective, the higher the credit score, the more likely the borrower will repay the loan on time. Lenders use credit scores as a gauge to determine the risk of lending money to a borrower and use this information to set the interest rate and terms for the loan.
So, how can you improve your credit score? We will look at five simple tips to improve your credit score:
Pay your bills on time. Late payments can have a significant negative impact on your credit score, so paying off your bills on time goes a long way to building a good credit score.
Keep your credit card balances low. High credit card balances might indicate that you are overextended, which can lower your credit score. Try to keep your credit card balances at 30% or less of your credit limit.
Check your credit report for errors. If you find an error on your credit report, dispute it with the credit bureau as soon as possible.
Limit your credit inquiries. Every time you apply for credit, it shows up as an inquiry on your credit report, which can lower your credit score.
Keep your old credit accounts open. The length of your credit history is a factor in your credit score, so keeping your old accounts open can help improve your score.
By following these tips, you can improve your credit score and make qualifying for a mortgage loan easier when you're ready to buy a home. Remember that it may take several months or even a year or more to see a significant improvement in your credit score, so it's essential to work on improving your credit score as soon as possible.
