As of September 2014, the housing market is on the rebound across America. The real estate market has seen a substantial increase. So how can you get in on this housing market recovery early? Well your credit score will make the difference. Credit is one of the biggest factors mortgage lenders will use to establish whether or not you can pay back their money.
Your credit score has more control over your life than you realize. This is especially true when you are looking to buy your first home or multiple properties to rent for profit.
There are multiple factors that go into your credit score that every consumer should be aware of, and possibly different credit reporting agencies that have different scores.
Some of the more common credit score factors:
- Your payment history, which on average makes up 35% of your credit score. Lenders want to know you can pay back what you owe, on time.
- How much you already owe out. This makes up around 30% of your score.
- 15% of your score is your length of credit history. Normally if you have had credit for a longer period of time, this will help increase your score.
- 10% is amount of your new credit, which can be scary looking if you have opened up new accounts in a short time.
- Lastly 10% is types of credit you have. What is your credit made up of? Retail accounts, credit cards and mortgage loans can be considered here.
There are different types of homes loans, and qualifying for a mortgage can be difficult even with a good credit score. Ultimately, someone with a 760 or higher score applying for a 30-year mortgage will have great rates. If you have a 660-759 score, it will give you a favorable loan rate, and if your score is below 660 you might want to wait.
So now that you know what can be in your credit score, how can you improve that score to make it more favorable on your mortgage rates?
Well firstly monitor your credit scores. There are many websites (even free ones) that can help in this aspect and they are pretty simple to set up, where it won’t affect your score. Once you’ve established what your score is, now you can set yourself to improve.
Here is some other helpful credit saving tips to take into the future when you are looking to get a mortgage:
- Pay your accounts on time. This should be pretty obvious but has to be said. High interest debt should be paid first in this strategy.
- If you have debt across many credit cards, consolidate them into one of your credit cards with smaller interest and fees.
- Try not to make numerous inquiries about your credit. If you inquire and get denied in a short period of time, that does not look good to the lenders, unless it’s for a car loan or mortgage.
- Lastly pay off your collections. Pay them off in full and try to negotiate the debt off your credit report entirely.
Now you can be prepared with this information and be less afraid of the banks as you apply for a mortgage. Remember lenders also want to see a steady income, stability in your employment and a solid credit score.
And if you live in the Richmond area, let Joyner Fine Properties help you in your real estate process. Our professional staff has information and services that will make it easy and comfortable throughout the home buying process.