get a credit score that will impress lenders

Buying a home is one of the most exciting times in our lives, but it can also be a daunting process! One way to make sure it goes smoothly is to increase your credit score. Not sure how to do that? Don’t worry, we’ve got you covered! Read on to learn more about how to get a credit score that will impress lenders and help you buy your dream home.

Keep Track of Your Payments

Your payment history is the most crucial factor for your credit score. Lenders want to see how reliably you pay your bills. The best way to increase your credit score is to pay all of your bills on time—not just your credit cards or loans but also your rent, utilities, phone bill etc. If you’ve missed payments, try to pay for everything as soon as possible because missed or late payments will appear negatively on your credit report for seven years. 

Pay Off Debt and Keep Balances Low

Credit utilization is another essential ratio when calculating your credit score. Lenders calculate this ratio by adding all your credit card balances and dividing that amount by your total credit limit. For instance, if you usually use approximately $2,000 of credit every month and your total credit limit across all your cards is $20,000, your utilization ratio is 10%. Typically, lenders like to see low ratios of 30% or less.

Keep Old Credit

Did you know the length of your credit history influences your credit score? It’s actually a bad idea to cancel old credit cards that are in good standing even if you’re not currently using them. Keep your old cards and try to use them once in a while to show some “activity” on your credit profile. Cancelling old credit cards will lower your total credit limit, which hurts your credit utilization ratio.

Limit Your Number of Credit Applications

Opening a new credit card can increase your overall credit limit and help with your credit utilization ratio. But every time you apply for credit, lenders must conduct a hard inquiry. This causes your credit score to drop and too many hard inquiries will harm your credit score. So, for example, if you need a car loan and you want to shop around for the best interest rate, try to do so within two weeks to limit the number of hard inquiries.

Consolidate Debt

If you’re carrying a significant balance on your credit cards and you’re finding it hard to pay off, consolidate this debt by using a low-interest balance transfer credit card. It can save you thousands of dollars in interest payments! For example, you can transfer your balance to a credit card that offers a 0% or 0.99% interest rate for 6, 10, or even 12 months. Then aim to pay as much as you can during the low-interest period. Paying off debt will significantly boost your credit score.

Since credit scores are crucial in the home-buying process and your overall financial well-being, it’s a good idea to follow the tips above to make sure your credit score is as high as possible. With these simple solutions, you’ll be on your way to owning your dream home in no time. Don’t forget to read the Falconcrest Homes’ blog for more great tips and tricks.

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