If you’re considering buying a home, good credit is key. Although buying a home with bad credit is not impossible, the right credit scores will make things easier.
How is credit determined?
Credit scores are determined based on late payments, the amount owed, and how often you miss payments. It also considers how many credit accounts have been delinquent compared to all your accounts.
It’s best to avoid bad credit home loans. Most people don’t realize how easy it is to improve your credit score in record time. Here are a few tips on the best and fastest way to build credit:
Pay your bills on time
Paying your bills on time shows you are responsible. Late payments stay on your credit report for seven years, which can severely affect your credit score. Every month you have a delinquency on your account, it hurts your credit score. The more you pay on time, lenders see you as an asset more than a liability.
Make frequent payments
If you can make a series of payments throughout the month that can keep your balances down, that quickly improves your credit. This helps increase your score immediately because it brings your credit utilization down.
Ask for higher credit limits
Asking for a higher credit limit on your credit card can boost your credit score even if your balance remains the same because your percentage of credit utilized will drop. But make sure they don’t perform a hard credit inquiry, which could hurt you.
Dispute credit report errors
Creditors make mistakes all the time. Disputing these errors can get them removed. Credit bureaus have 30 days to investigate and respond.
Get added to someone’s credit card
If you know someone who has a long, positive history of credit card use, check to see if they have a high credit limit. If so, they may be willing to add you as an authorized user. You won’t have to use the card at all for your credit to improve.
Get a secured credit card
Getting a secured credit card can help build credit over time. Make sure it’s a secured card that reports your credit activity to all three credit bureaus. Although you will have to back the card with your own money initially, the card company does periodic reviews to determine whether you are eligible for an unsecured card.
Do not close your credit cards
Closing your credit cards can hurt your credit. Although it sounds a little crazy, lenders are looking at the credit limit that was lost when they calculate overall credit utilization. Use the card occasionally, so it won’t be closed.
These are some surefire ways to quickly build your credit portfolio and help you get the home of your dreams. Find out what your credit score is by getting free copies of your TransUnion, Equifax, and Experian report at www.AnnualCreditReport.com.
For more tips on building your credit, contact an associate at Mortgage Investors Group today!