Lower your mortgage rate and qualify for your dream home by following these five rules that can improve your credit score.
Are you searching for a home or planning a big purchase in the near future? Is your credit score not quite up to par? Improving your credit score is the first step to qualifying for the home of your dreams. Better credit scores can lead to lower mortgage rates, and thus save you dollars in the long run. Below are five tips to improve your credit score:
- Always pay your bills on time. The simplest way to earn a good credit score is to make regular monthly payments on time. You can even make multiple payments throughout the month if your creditor allows. Juggling a lot of bills can be tricky, especially when you are trying to set aside savings for a big purchase. Putting your credit card bills aside can really damage your credit score and make or break your ability to get your dream home.
- Use 30% or lower of the total credit allotted to you. A major player in your credit score is the ratio between how much revolving credit you have versus how much you actually use. The smaller the percentage, the better off your credit score. Pay down your balances and keep those balances low. Use your credit card strategically and make several payments on your card throughout the month rather than in one lump sum.
- Eliminate nuisance balances. Nuisance balances are the small credit card balances you owe throughout several credit cards. Your credit score looks at how many of your open accounts have balances. It is better to have one card with a $50 balance rather than five cards each with $10 balances. Stick with one or two credit cards and keep them for a long time – you will be rewarded in the long run.
- Don’t move your debt around. Try to avoid no-interest balance transfers from other credit card lenders, even if it is saving you money. Opening new lines of credit to pay off your current debt will lower your score. Your credit score will be better if you have fewer open accounts and you focus on paying those off.
- Give yourself time. Unfortunately, no matter how hard you try, bad credit scores don’t just go away overnight. Plan ahead before a big purchases to give yourself enough time to pay off your debt balances. Your credit score typically includes information from the past year – unless you have a history of bankruptcy or collections (this stays on your record for 7-10 years). Your best bet is to stay at 20% of the credit allotted to you and pay your balances in full on a regular basis.
Do you have more questions about improving your credit score? Check out our credit tool to see how a higher credit score can save you money on your mortgage. If you would like to learn more about how your credit score can affect your mortgage rates or would like some expert advice from one of our mortgage advisors, hit the chat button now or call 1-844-778-5626.