The way mortgage interest rates are today, you really need to apply for a refinance or buy that first house. But what if your credit score isn’t great? You can’t let bad credit keep you from investing in your future when rates are this crazy low. We’re locking loans as low as we ever had right now. It’s the absolute best time to buy a house or refinance your current one.
If you have to give your credit a push, there isn’t an easy path to long-term credit success. There’s no magic wand you can wave and suddenly you have great credit. But with hard work and determination, you can raise your credit score by following these principles:
- Keep Your Credit Card Balances Low
- Keep Your Old Debt Around on Your Report
- Pay Your Bills
Keep Your Credit Card Balances Low
When you look at your monthly credit card statement, the one thing people don’t always check is available credit. They see how much they owe, what the payment is that month, and what they spent that month. When you’re talking credit score, though, available credit is where it’s at.
You ideally want to keep your available credit on your card at 70% or higher. Ideally, using less than 30% of your available credit looks great to credit monitoring agencies, and raises your credit rating. This is also known as your “utilization ratio”.
Remember, “utilization ratio” isn’t just calculated by your last payment. Your report gets an up-to-date snapshot of your account, so even if you pay off your balance every month, but use your card for everything as “revolving credit”, your report can reflect a higher utilization ratio prior to your payment.
Keep Your Old Debt Around on Your Report
While it’s true that you want to get rid of negative credit items ASAP – generally they fall off after 7 years – not all debt on your report is bad. Good debt – debt that you made payments promptly on and have handled properly – is actually good for your score.
The longer you’ve had good credit and a history of being a good payer, the better. Leave paid-off and on-time debt on your report as long as you can, and watch your score grow! If you have a credit card that you don’t use, but has no annual fee, you can leave it open as well – this is just more unused credit!
Pay Your Bills
I know, saving up for your big down payment is hard. But you can’t, absolutely CANNOT slight your other bills to get there. It’s essential that, to maintain your credit score, you make at least the minimum payment every month on everything.
I know, it’s hard. You may feel like that down payment is years away, and that skipping your credit card bill a month or paying the gas bill late will help you get started.
One missed payment can WRECK you. That’s especially true as you gear up to buy a home. That’s when you really need to mind your p’s and q’s, dot every “I” and cross every “t”. So, don’t use your monthly bills as a piggy bank. Pay them, on-time, every month. Think of it as a building block for your credit every month that you get to lay.
If you follow these rules, your credit score will go up. That’s not a guess, that’s a fact. When your credit score rises, your interest rate goes down. Everything is easier with good credit. Make the choice, TODAY, to fix your credit score.
And when you do, call us and buy a house!
When you work with The Home Loan Expert, Ryan Kelley, we work with you, step-by-step, to make sure that you get the lowest rate possible. These tips will help you when you’re looking to buy a home in St. Louis, Chicago, Nashville, or Indianapolis. Call us in St. Louis at (314) 781-9700, Chicago at (773) 770-6438, Indianapolis at (317) 550-1515 or Nashville at (615) 810-8555. You can always apply online at www.thehomeloanexpert.com, and we’re also open on Saturdays to better serve you. Don’t forget to follow @TheHomeLoanEx on Twitter for breaking mortgage news and knowledge. Nobody gets lower rates on better loans than The Home Loan Expert, Ryan Kelley, why go anywhere else?