Before you even think about buying a home, you should ask yourself two questions: “What’s my credit score?” and “How do I raise it?” Knowing your credit score will help you negotiate a good interest rate on your mortgage, and if you can raise your score, you’ll get a loan with a lower interest rate.
Welcome back to Expert Real Estate Tips dot net. I’m Ilyce Glink.
Before you even think about applying for a mortgage, ask yourself this question: What’s my credit score? If you don’t know the answer, it’s time to find out.
Your credit score is a three-digit number that represents your entire credit history. Credit reporting bureaus calculate this number by looking at things like outstanding debts, if you pay on time or not, and whether you carry a balance on your cards.
The typical range for a FICO credit score is between 300 (the worst) and 850, which is the best. To get a good or “prime” rate on a home loan, you’ll want to have a score that’s in the high 600’s or preferably above.
So what do you do if your score isn’t quite where it should be?
There are a few simple ways to raise your credit score. The easiest way is to simply pay all of your bills- in full -on time- every month. This helps you avoid carrying balances on your credit cards and will raise your credit score.
Credit reporting bureaus though have a few secrets that can trip you up.
GRAPHIC #1: INQUIRIES
First on the list are inquiries: every time you apply for credit, the lender pulls a copy of your credit history. This is called an inquiry. Inquiries can lower your credit score up to five points. If you’re thinking about getting a home loan soon, try to make all your applications within a two-week period, and that way your score only takes a hit once.
GRAPHIC #2: DUE DATES
When a bill has a “pay by” date on it, that’s the deadline by which your payment has to be processed. It’s not the mail-in date. If you’re mailing your bill, make sure you allow at least seven to ten days for the post office to get it to its destination. A faster and I think better way is to pay is through your online account, where you can pay the day your credit card bill is due. And it’s going to get there on time.
GRAPHIC #3: HIGH BALANCES
If you carry a balance on your credit card, try to keep it low relative to your maximum credit limit. A good rule of thumb is don’t run a balance that’s more than 25-30 percent of your maximum credit limit. If you run a balance that’s a higher percentage of your maximum credit limit, creditors will think you can’t manage your money, and they’re gonna ding your credit score.
Credit scores are designed to predict how risky you are as a borrower. The higher your score, the less risky you are as a borrower and the better interest rates you’ll get on a loan.
I’m Ilyce Glink and for more personal finance and real estate information, go to my website, ExpertRealEstateTips.net.