Credit scores can be compared to your driving record. They take into account your years of past behavior, rather than just your present actions. It is best to maximize your credit score before you begin the process of buying a home, in order to qualify for and secure the best mortgage rate.
Debts, including credit cards, auto loans and student and personal loans will appear in your credit report. Paying your bills on time is one of the best ways to ensure your credit remains healthy.
“If your credit score isn’t where you want it to be, you can improve it over time,” said A. Wade Douroux, President and CEO of Resource Financial Services. “And while your credit score is important, it isn’t the only factor we consider when you apply for a loan. Your income, employment history, monthly debts, the size of your loan and your down payment all factor into the equation.”
Government-backed mortgages like FHA loans will have lower credit requirements than conventional fixed-rate loans and ARMs. “We have many options for those with lower credit scores,” said Douroux. “The best thing to do is to ask an experienced mortgage banker who can help identify the right loan for you.”
To improve your credit score, here are some simple things you can do:
• Eliminate your credit card balances. If you have small balances on several credit cards, pay them off and select one or two “go-to” cards you can use for everything – paying them off monthly. If you can’t pay off your credit card each month, try to keep your debt balance relative to your available credit limit at or below 30% to maintain a good or excellent credit score.
• Leave old debt on your report. The longer your history of good debt, the better for your score. Don’t try to get your home or car removed from your credit report the minute you’ve paid it off. This is good debt you’ve handled well and paid as agreed and it’s good for your credit score.
• Pay bills on time. One of the biggest things that leads to a good credit score is simply paying your bills on time each month. If you’re bad about paying your bills – or paying them on time – it damages your credit and hurts your score.
• Don’t send up a red flag. Some behaviors indicate risk, which can hurt your credit score. If you suddenly charge more than usual, pay less on bills than you normally do, take cash advances or use your cards somewhere that could indicate future financial stress, such as a pawnshop or a divorce attorney, your credit score could suffer.
• Don’t obsess about your score. When you know you’ll need credit soon, that’s the time to focus in on your credit score. In the meantime, just pay your bills and use credit responsibly. Your score will reflect your smart spending behavior.
Resource Financial Services exists to make people’s dreams of home ownership a reality. Our experienced mortgage specialists work hard to educate homebuyers about the wide variety of loan programs that can be tailored to meet their individual financial needs. Homebuyers can expect in-house decision making, upfront underwriting with same-day pre-approval, 5-Day Processing, and quicker closings.
Call toll-free at 877.797.4545 to speak with a mortgage banker or visit Resource Financial Services online at rfsmortgage.com to learn more.