If you’re considering purchasing your first home, determining whether you can afford the monthly mortgage payments is not necessarily the first step in the process. If you haven’t in the past, it’s time to take a look at your credit score. This number tells lenders whether you’re “credit-worthy” and how likely you are to repay your debts. The higher your credit score, the more likely you are to get approved for a loan, and the better your terms will be that could save you money in the long run. That’s why it’s so important to understand your credit report, manage your credit score, and look for ways to improve it when you’re thinking about buying a new home. Here’s 3 ways to build your score so you can buy your new home.
One of the most important factors that impact your credit score is whether or not you make your payments on time. Maintaining 100% of on-time payments is extremely important when you’re applying for a loan. Lenders want to make sure you have a history of on-time payments so they can feel comfortable that they’ll be repaid on time as well.
Another extremely important factor that impacts your credit score is the amount of credit available to you, as well as the amount of that credit you’re currently using. It’s always ideal to maintain a low credit utilization %, but even making small decreases on your total due each month can help you improve your score.
At least not when you’re getting close to applying for a home mortgage loan. Applying for new credit cards or lines of credit often can negatively impact your score, so you want to stay away from opening new lines of credit when you’re working towards buying a home.