When you begin to look for a home, the first thing you think of is how much you can afford based on your savings, and the help you qualify for. Before you do anything you should find out your credit score in order to determine whether or not you should try to raise it before you apply for a loan and try to qualify for it.
It’s understandable that you may have fallen on hard times recently, especially since the crash in 2008, and you weren’t able to pay off your credit cards on time, and as a result your credit score suffered.
The good news is that you can help yourself get back to a good score and buy the house you want to within your budget.
Watch your balance
This may seem like an obvious one, but watching your credit card balances and keeping an eye on the interest rates of any credit cards you apply for is vital to improving your credit. One thing to keep in mind is that just because you get approved for a large credit line, doesn’t mean you should use it all up at once, the best thing for your credit score is to use it and pay it off as you go so that you don’t have a large balance. A way to help encourage yourself to pay off your charges as soon as you can, see if the credit card will allow you pay multiple times during the month long statement period.
Choose one or two cards to use predominantly
One thing you want to avoid is using multiple credit cards for small payments. The best thing you can do is stick to using one or two main credit cards for all of your purchases, because using one card for a $20 charge and another for a $15 charge and then a third for a $250 charge is going to hurt your score. If you currently use multiple credit cards, pay off the balances and begin using this approach as soon as possible.
Not all debt is bad
Many of us have debts ranging from credit cards, to student loans and car payments, just to name a few, and our goal is to get rid of them as soon as we can. But there is one thing that most of us don’t know, some debt is good debt and it can actually improve your credit score. As long as you handle your debt properly, and pay it on time for the amount agreed upon, you can improve your credit score. Take your time paying off these good debts, they may be a nuisance but they are helping you qualify for loans for buying your next home!
Don’t put a house purchase before your bills
Working in the real estate industry, we know how much it takes for you to be able to buy your home, and that you want to save as much money as possible in order to afford it. Many people make the mistake of holding off on paying bills in order to make this purchase, and as a result they hurt their credit score before they can even try to qualify for a loan.
These tips are just a few of the many that you should consider when trying to improve your credit score before purchasing a home. You want to have the best chances at affording your home, and a bad credit score isn’t going to get you a home that you want and need. For more tips on improving and consistently monitoring your credit score, and then for assistance going on a search to buy your new Colorado Springs home, please contact the Merit Co team.