The first step in the process of buying a new home is not what most people think. Many believe it would be to look at listings, or get pre-approved for a mortgage, but it’s actually none of those. The best first step you can take is checking your credit score, and improving it if need be. Here’s some tips on getting your credit score to a place where you can get a better deal on your mortgage.
1. Pay on Time
Timing, when it comes to credit, is extremely important. It shows you have borrowed within your means and that your financial situation isn’t precarious. So always pay your bills on time, whether it’s your phone bill, your credit card bill, or something much bigger like a previous loan or car payment. All of these matter, and all of them should be paid before the due dates. Thankfully, this has become much easier thanks to automatic payment options, which will pay things on time even if you forget.
2. Keep Old Accounts Open
Age is important to credit scores as people want to see a history of dependability, not just a recent ability. If you have a fully paid off credit card, for example, it’s a good idea to keep it open, especially if you’ve had it for a long time. That will give your credit score a history that people find important.
3. Credit Check Infrequently
If you’re constantly getting your credit checked by institutions and businesses, it lends to the impression that you’re taking on too much, and certainly more than your finances can handle. So while carrying and paying off debt is key to building a good credit score, sound and discernible life habits are as well. So the next time you can just pay for something but might want to get it on credit anyways, consider how often you’ve had your credit checked and maybe just buy it outright, or leave it for another time.
4. Avoid Loans before Mortgage Applications
Getting credit just before applying for a loan is a big red flag for mortgage brokers and banks, which means you should avoid taking on additional credit before getting your mortgage pre-approved. Live within your means and pay off debt before taking out any big loan. This gives the impression that you can exercise control and discipline for when you need bigger amounts of cash.
One of the first steps to getting a great mortgage is having a great credit rating. It’s an important aspect of modern living, but one many people don’t fully understand. That’s why it’s important to have some knowledge on your credit rating early into your home buying process. That way, you can figure out how to improve it, if needed, and get a better mortgage
Posted by Gurpreet Ghatehora on
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