5 Ways Homebuyers Can Improve Their Credit Score
5 Ways Homebuyers Can Improve Their Credit Score
Having a good credit score will not only help homebuyers qualify for a mortgage but it can also help them get a good interest rate. Credit bureaus like Experian who determine scores, look at a variety of different factors when determining someone’s credit number.
Here are some ways homebuyers can improve their credit score so they can get approved for a mortgage.
1. Pay Your Bills on Time
Having a history of late payments will have a negative impact on someone’s credit score so they need to consistently pay all their bills on time. If they receive an unexpected bill in the mail and can’t afford to pay it off by the deadline, they should contact the lender and see if they will let them pay their bill in installments. They’ll also avoid having to pay late fees which can eat away at their down payment.
2. Reduce Debt
If a homebuyer has maxed out multiple credit cards or has a large car loan, it could be negatively impacting their credit. When someone is constantly maxing out their lending limits, credit bureaus see this as a red flag. If someone wants to improve their credit score before applying for a mortgage, they should try making more than the minimum payment each month and work towards paying off debt like car loans early if they are able to.
3. Request Credit Increases
While it may seem counterintuitive, asking for a credit increase can improve a homebuyer’s credit score, as long as they don’t max it out. Credit bureaus like it when borrowers don’t push the limit on their loans because it shows that they’re responsible and demonstrate a lower risk of defaulting on a loan or claiming bankruptcy down the road.
4. Limit New Debt
Ideally if someone wants to improve their credit score to qualify for a mortgage, they should avoid opening any new accounts. However, if they need to purchase a car or only have a few credit cards that aren’t maxed out, their credit score won’t take a beating. They should avoid opening store credit card accounts to simply take advantage of promotions or discounts.
5. Check for Credit Report Mistakes
Homebuyers shouldn’t assume that the information on their credit report is accurate because mistakes do happen. Before applying for a home loan, they should request a copy of their credit report and review it for any inaccuracies. It’s not uncommon for people who have popular names to have incorrect information on their report due to identity confusion. If they do find an error, they should contact the creditor to dispute the error.
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