Everybody has a dream home; it could be a single-family bungalow or an astounding five-story manor. Whatever vision you have in mind, preparing yourself and your finances to realize your dream is crucial.
One of the best things you can do today to work toward your goal is to improve your credit score. Having a good credit score is vital if you want to take a mortgage loan. However, boosting your credit score doesn’t just happen overnight. You must work on it for some time, but the benefits are worth it!
Here are some practical tips you can start doing today to boost your credit score and improve your chances of securing a mortgage loan.
Why Should You Improve Your Credit Score?
Taking out a huge mortgage loan when buying a home is common for most households in the nation. Unless you’re extremely well-off and can afford to pay for your dream home in cash, you should really take care of your credit score.
Lenders use your credit score to determine various things about your financial capabilities, such as:
- If you have any existing debts.
- If you can pay a loan on time.
- If you regularly take out loans.
These are some things lenders can find out about you through your credit score. A good credit score gives lenders the confidence that you can repay a loan on time.
If you think that having no credit history is a good thing, you’re wrong. Lenders have no data to draw their conclusions which could also hurt your chances of securing a loan.
Taking out loans is okay, so long as you know how to manage them. Paying off your loans on time makes you a more viable applicant for lenders when taking out a significant mortgage loan.
How Can You Boost Your Credit Score for a Mortgage?
Bringing your credit score up takes a lot of time and work. If you want to secure a mortgage, here are some steps you can start doing today to build an impressive credit score.
Clear Your Debt First
First things first, try to clear your debt. Regardless of how small it is, debt will always be a hindrance to your credit score. Prioritize paying off debt first before anything else.
If you have an enormous debt to clear, try to break them down into smaller payments. You can also speak with your creditor to make a realistic, manageable, and suitable payment arrangement for your financial situation.
Minimize Your Credit Card Use
If you’re trying to improve your credit score for a mortgage, then you should minimize your usage of credit cards. Excessive credit card use can lead to debt and hurt your score more than it can help.
Before using your credit card, make sure you can pay your balance on time every month. This will not only help you avoid debt, but it can also boost your credit score. The key to an excellent credit score is by using only what you can afford and paying your bills on time.
Dispute Any Credit Report Errors
Credit report discrepancies happen more than you think. To ensure that any errors don’t hamper your credit score, review your reports every time you get them and dispute any incorrect information immediately.
You should also keep track of your existing and paid debts on your credit report and keep receipts. You can use this to disprove a questionable credit report.
Refrain From Applying for New Credit
When scoring your credit, creditors include all your existing lines of credit. Applying for too many loans or opening multiple credit cards can lower your score as lenders view this as a sign of financial instability.
Remember that every time you apply for new credit, it will show on your report, making lenders wary about lending to you. Make sure that before you open a new credit line or request a limit increase it is critical for your financial health.
Never Miss Out on Bill Payments
Paying all your bills on time is essential to maintaining a great credit score. If you think you might miss out on payments, either set up automatic payments or contact your lender and decide to avoid late payment fees.
Late payments could stay on your credit report for seven years, which can significantly damage your score for an extended period.
How Long Does It Take to Improve Credit Scores?
As mentioned, improving your credit score might take some time. How long it takes for you to rebuild your credit score depends on how much debt you have and how far you are from your target score.
Most mortgage lenders require aspiring homeowners to have a credit score of 620 or better before they’re approved for a loan. If you have a severely low credit score, are just starting out, or have a considerable debt to pay, it might take you years to get to this score.
If you maintain an excellent credit score and remain debt-free, you can expect a significant increase in your credit score within months.
Start Building and Saving for Your Dream Home
Rebuilding your credit score is a huge undertaking and might take years to accomplish, depending on your goal and situation. The strategies we provide can help you improve your score and ultimately will help you get closer to your dream home.
If you have no credit history, this is an excellent time to start building your credit. Start with small purchases, pay them on time, and build from there.
If you’re ready to purchase a home in Minneapolis, our team at Real Estate Corners can help. Real Estate Corners is a premium and vetted flat fee Minneapolis, MN, real estate company.
We can help you find the home of your dreams, help you get pre-approved for a loan, and provide you with more tips to improve your credit score.
Contact us today, and let’s get started!