Prepare to Buy: Credit Readiness

Prepare to Buy: Credit Readiness

When you start talking about buying a house there are so many considerations to be made but one of the first that comes to many people’s minds is their credit standing. If you are considering buying a house this year, start considering your credit score now. You may be surprised how little things can impact your credit for the better. That’s why I have put together a few suggestions for things to try when getting your credit ready for home buying. This being said, each person’s credit history and financial situation is different so while other people have seen an improvement using these suggestions, there is no guarantee—if you are looking to make dramatic improvements or would like personalized advice, I recommend you speak with a credit counselor.

Open a line of credit (e.g. credit card) and use it.

There is a misconception that if you don’t open lines of credit, you will have a good credit score. While it is true that you will not have anything negatively impacting your credit if you don’t have lines of credit; it is also true that you won’t have anything positively impacting your credit. If you plan to buy a house, you will likely need to prove your credit worthiness so by opening a line of credit (e.g. credit card)  (e.g. credit card)  and continuously paying it off each month you will positively impact your credit score.

Give it time.

Building a good credit score takes time as you build your history of on-time payments, after all creditors are interested in your ability to repay the borrowed amount. Most mortgage companies are going to pull your FICO credit score; to have a FICO credit score the account must be open for a minimum of six months.

Practice good habits.

As you start to use the line of credit (e.g. credit card), there are a few things to keep in mind, the first, make all your payments on time—all payments including credit cards, utilities, medical, etc. One of the last things you want when trying to build up good credit is for unpaid bills to be reported to a collection agency. Another thing to keep in mind, if you are using a credit card do your best to pay it off in full each month but if not possible to pay it off fully, do your best to keep the balance low. By keeping your credit card accounts open, using them sparingly and paying them off in full you will be contributing to good habits and to a good credit score! There are also some things you want to avoid, click here to read about Five Sneaky Things that Can Tank your Credit.

Keep up with your progress.

By being aware of where your credit score started and setting goals, you are more likely to be successful in becoming credit ready quicker! There are lots of services out there that assist you in tracking your credit score and provide tips along the way. While these services are helpful in making decisions that will improve your credit the score provided can be different than what your mortgage banker would pull, you can read more about that here. As long as it is kept in mind that the goal is working towards a better credit score and not shooting for a specific number, these services can really benefit prospective home buyers!

Additionally, our mortgage bankers are happy to pull your credit report and discuss your mortgage options now and in the future. If you are serious about purchasing a home sometime this year, I would recommend speaking with one of Stockton’s Mortgage Bankers in your area to determine the best plan moving forward into 2020.