Ways to Boost your Credit Score Before Buying your Own Lake Home
It is well known that your credit score influences your interest rate on a home mortgage, and over time that higher interest can cost you big bucks. It is worth improving your score before you make the decision to buy a home at the Lake of the Ozarks, and Your Favorite Real Estate Team has some tips to help you do just that.
What makes up your credit score?
Your credit score is determined by five factors. 1) Payment history (makes up 35% of your score). 2) Utilization - amount of credit used versus what is available (makes up 30% of your score). 3) Credit history length (makes up 15% of your score). 4) New credit/opening of new credit accounts (makes up 10% of your score). 5) Mix of credit – e.g. revolving accounts like credit cards are worse than installment accounts like car/personal loans (makes up 10% of your score).
Where to start.
The first thing to do is to get your credit reports from all three credit bureaus (Experian,
TransUnion and Equifax) and look for any errors. If found, you should go through the proper
dispute process with each creditor to get those errors corrected. Also, see if
you have high balances compared to credit limits and pay those down. Pay off any collection accounts owed as well.
If you have revolving credit such as
credit cards, it may help your score to replace those with a personal loan. It is best to do that with enough time to allow
months of consistent payments to be made in your credit history.
Maintenance behaviors.
It is important to avoid major purchases on your credit
cards and to look at your debt-to-income ratio. It is a good idea to hold off on unnecessary expenditures
and put that money towards a savings. Funds
may be needed for a down payment or other closing expenses and a savings will
also look good when the bank considers your assets.
Things that take time.
Paying down your debt may not happen overnight. But obviously, the less credit you are using compared
to what you qualify for the better. With
credit cards, the goal should be to pay off the balance in full each
month. But if you have not done that, with
each individual credit card, keeping your utilization rate to less than 30% is very
helpful.
Ultimately, your total utilization of credit versus the
total you have available to you is the most critical factor. It is best to keep your overall utilization of
all your credit below that 30% rate as well. Lenders will also look at your debt-to-income
ratio – your total monthly income divided by your total monthly expenses – and want
to see that at around $43% or lower.
Finally, a longer payment history will help your score and a
consistent record of making all your payments on time is key. If your payment history shows a pattern of
late payments or collections it may take months of consistent payment activity
to raise your score. But it is worth
it. Try setting up automatic payment for
your accounts where possible and make it a goal to pay on time.
Your Favorite Real Estate Team is experienced with
helping people realize their dream of owning a home at the Lake of the Ozarks. We strive to make the entire
process as seamless as possible and know how to help our clients get prepared
long before they even look at the first property. If you are looking for a realtor at the Lake of the Ozarks, we are proud to be your trusted partner in the realization
of your dreams!
CONTACT ED SCHMIDT FOR ALL YOUR LAKE OF THE OZARK REAL ESTATE NEEDS
Comments
Post a Comment