Your credit is one of the most important factors in qualifying for a home loan, and it will determine what sort of interest rate you are able to get. That interest rate can make all the difference when it comes to how much home you can afford and keeping your payments within your budget. If you have some credit problems, it’s a good idea to try to improve your score before you buy a home. Here are some simple ways to do that.
Careful Use Of Credit
Credit cards are unsecured debt, and a lot of that type of debt can make lenders nervous. If you are carrying high balances on your credit cards, paying them down can make a big difference in your score. It will give you a better free credit to debt ratio and show that you handle credit responsibly.
When you are looking to buy a home, it’s a good idea to avoid taking on any new debt. Don’t apply for any more credit cards or increase the limits even if they are offered to you. Keep your credit stable and focus on paying off the debt you currently have.
Be sure to make all of your payments on time. Missed or late payments can hurt your credit score quickly.
Avoid Large Purchases
When you are trying to buy a home, it generally is not the time to take on a large loan for another big purchase such as a car, boat, or RV. These purchases will increase the amount of debt you have and make it more difficult to qualify for a loan. It will also likely affect the amount you are able to qualify for.
It’s best to save those types of purchases until after you have completed the home buying process. Getting loans like this off your credit is also a good way to improve scores. If you are able to, consider selling or paying off a car loan or other similar loan.
Pay Off Small Bills
Getting rid of some of the smaller items on your credit is a good way to improve things without having to put out a lot of money you don’t have. If you have a little bit left on a student loan, consider paying it off. The same goes for any outstanding medical bills or judgments against you.
The fewer items you owe on, the better your credit will look to lenders. Get a copy of your report before you start applying for loans, and clean up what you can. In the end it will make buying your home easier and more affordable.