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How to Pump up Your Credit Score
Though the exact breakdowns of what credit score garners what interest rate vary from lender to lender, all will tell you that credit score does indeed play a role in the kind of financing you can receive. If you are interested in buying a new home and taking out a mortgage to do so, your credit score must be something you spend some time thinking about and possibly investigating in order to make it better. The difference between two interest rate brackets can mean thousands of dollars of savings, so just how do you go about raising your credit score?
Know Your Credit History
Federal law has allowed every consumer the ability to pull their own credit report each year from all three of the accredited companies in the United States that offer credit history services. In doing so, you can look over your own credit history to get your credit score, and possibly find errors, obstructions or other sticking points that a lending agency would see when they pull your file to investigate your viability for a real estate loan.
All of the loans, credit inquiries, credit cards and other outstanding debts you’ve accrued will show up on the credit history and affect your credit score, and anything that you see is something the lender may take into account when creating your rate. You do not harm your own credit by pulling your credit report each year, so don’t be afraid of harming yourself by doing homework on your own credit worthiness for your future home.
Use Common Sense on Payments
There is no better advice for raising a credit score than paying your bills on time, in full, every month. That means paying your utility bills, credit card bills and loan payments every month, in full. It goes without saying that a history of missed payments will harm your credit, so don’t let the temptation to hold off on paying that $300 credit card bill for one more month keep you between raising your credit score by a few points and landing your dream home.
If you do carry a balance, and many people do, try to keep it out of the neighborhood of the limit for that particular card. By maxing out your cards, you are telling a lender that you have actively lived beyond your means and could be doing so again in applying for a loan. Keeping your balances under half of the maximum allowed by your card is generally advisable to show an ability to pay off your debts.
Don’t Over Extend
When thinking about a real estate purchase, if you go in and pull your credit history each year, that will not harm your credit score and is called a “soft pull” because it has no bearing on your credit score. If lenders are continually pulling your credit history, those are “hard pulls” that do in fact affect your credit report.
A large number of inquiries into your credit history can indicate that you have tried to open a lot of credit in a short period of time, something that can make lenders squeamish about lending you money. These credit inquiries are done every time you apply for a credit card, so try and keep your new credit card applications to a minimum each year. These include the store credit cards that so many retailers are offering these days. The convenience of having an extra retailer-specific card should not outweigh your desire to get the best real estate loan rate possible when the time comes for a new home purchase.
Personal credit is an extremely important component to your ability to purchase anything with a high price tag, especially as it relates to a home purchase. Maintaining the best personal credit history possible goes a long way towards improving your credit score that any lender will see when pulling your file. When the time comes for you to embark upon the exciting process of buying a new home, don’t let your personal credit be an obstacle. Maintain your personal credit score and you will set yourself up for the best interest rates for any loans you pursue.
Call us, 509.438.9344, Email us, or fill out the contact form below.
We respond right away! -Colleen Lane, Realtor®
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