Are up dreaming about buying a home? Spring is a fantastic time to start looking for a new home, but there may be a few things you back from making an offer on your dream home like your credit rating. If you feel like you will never be a homeowner because you don’t have a perfect credit score right now, then we have some tips that will help improve your credit before buying a home. Here are a few ways to give your credit rating a much-needed boost so that you can purchase the home of your dreams.
How to Improve Your Credit Before Buying a Home
Everything hinges on your credit score when it comes to home financing. It is a simple three digit number, but lenders value what it tells them. They want to see an acceptable credit score so they feel confident that you can fulfill payments on your home loan. Having a good credit score is important when buying a house because you are asking a lender to trust you with a great deal of money for a long time.
Here are a few tips on how to improve your credit score:
Paying your bills on time each month helps increase your credit score, and it also shows lenders that you are responsible. If you have missed a few payments in the past or been late, then you will just have to do better moving forward. Poor payment history will not haunt you forever if you show that you can pay your bills on time each month for at least a year.
2. Pay Off All Outstanding Collections
You might have to pay off old collections. However, even if you pay off the collections, they will still show up on your credit report for many years. You might have to these to a home loan lender even if you settle the balance in full.
3. Keep Your Credit Card Debt Low
Never max out your credit cards. Ideally, you should only use 30 percent or less of the card amount – ideally you should only use 10 percent of your available credit in order to increase your score quickly. High outstanding amounts push your credit score lower each month instead of increasing it. Check your credit card balance regularly to ensure that you are not using more than 30 percent of your credit each month.
4. Pay Off Debt
It is imperative that you pay off debt to improve your score. Do not go out and get another credit card and then transfer the balance from one card to another. This practice will tank your score, and it will take a very long time to bring it back up to a good number.
5. Do Not Close Unused Credit Cards
Closing unused credit cards will not raise your score. In fact, it might lower it.
6. Do Not Open New Credit Cards
Opening new credit cards might hurt your credit instead of increasing it. If you get a number of new credit cards it looks like an act of desperation and that you need credit fast. This is a red flag and can seriously hurt you.
7. New Credit
If you do not have a long credit history, then it is imperative that you avoid opening up a bunch of credit. You will seem like a risk to the bank. In addition, your score will lower if you have a lot of new credit on your report.
8. Re-establish Your Credit
If you have had a few bumps in your credit history, then you must reestablish yourself. Start out small and show that you can pay off your balances. Remember, responsible credit management not only helps you improve your score but also shows a home lender that you can be trusted to handle money and loans.
9. Be Responsible with Credit Cards
Yes, it’s important that you have credit cards, but not a whole wallet full. Instead, use one or two. Keep the balance low and pay on time.
Luckily, you can improve your credit before buying a home! Just follow the above tips, see your credit score increase, and start your journey to becoming a homeowner.
When you are ready to buy, let our team help you find the perfect home in Kansas City. Give us a call today! You can reach our team at 913.521.8806. Want to come and see us? Our office is conveniently located at 5000 W. 135th St. Leawood, KS 66224