Are you paying cash for your next home purchase? If you are like most home buyers, the answer is “no”. In any given month, approximately 2/3 of home purchases are financed. If you are one of the many who are considering purchasing a home, you are likely well aware that your credit score matters when it comes to getting a mortgage. Why?
All other things being equal, the better your credit score, the better terms you can get with a lender. This can mean a lower interest rate, resulting in either lower monthly payments or the ability to purchase a more expensive home for the same monthly payment. Yes, like it or not, your credit score matters. Fortunately, it’s a score that you can always improve, no matter how bad it is.
What are the top 5 tricks for improving your credit score?
- Pay everything on time. Rent/mortgage, utilities, credit cards – everything! Late payments hurt your credit, and anything that goes unpaid could go to a collection agency, and that’s very bad for your credit. So pay absolutely everything completely on time.
- Don’t use all the credit you have. Instead of spending up to the limit on your credit cards or other lines of credit, keep the balance well below the limit. I recommend paying off cards and lines of credit each month. If you have to carry over a balance, keep it under 30% of the limit for each line of credit.
- Don’t open multiple new accounts. One calculation in your credit score involves the average age of your accounts. The older the average age of your accounts, the better. So, opening new accounts lowers the average age of your accounts, lowering your credit score.
- Keep good accounts open. “Good accounts” don’t have an annual fee. Even if you never use it, there’s no harm in keeping this kind of account open. For the same reason as above, accounts that you have had for a long time count for you on your credit score.
- Check your credit reports annually for mistakes. When you find a mistake, correct it.
BONUS: Don’t pay for “credit repair” services, whether from a company or an inidividual, including real estate agents (potential conflict of interest). I have heard of people paying hundreds of dollars to companies who are completely ineffective in improving a person’s credit report. Instead, use a USDA approved education provider to learn the tools and strategies for improving your credit yourself. Yes, you can do it! If you would like a copy of this list, feel free to contact me.
Are you wondering how much you would qualify for, considering your credit score and other factors? I am happy to recommend several excellent local lenders who can help.
Aaron Lovett is a full-service Realtor in Smyrna, TN, working out of the regional office of Century 21 United Realty in Murfreesboro, TN. His service area includes Smyrna, Murfreesboro, the remainder of Rutherford county and surrounding areas, including Nashville and Davidson county. He cares for the needs of sellers, buyers, and investors. Aaron has lived in the area for over a decade. He takes pride in helping home buyers and sellers reach their real estate goals.
Share this Post