If you are like most people who are interested in purchasing a home, you don’t have enough money in your savings account to cover the entire cost. As such, you will need to go through a lending institution in order to obtain the money you need to purchase your home. To ensure you get the best rate and loan possible, it would be a good idea to take steps toward improving your credit rating before you start looking into your loan options. While improving your credit rating is a process that needs to be completed over time, it really is easier than you might think to improve your credit rating. Whether looking at Maryland luxury homes or a condo in Ulster County, here are 5 tips for improving your credit rating before you purchase a home.
Tip #1: Review Your Credit Report
Perhaps the simplest step you can take to improve your credit rating is to simply review your credit report. Thanks to new federal guidelines, you can obtain a free copy of your credit report every year by visiting www.annualcreditreport.com. Once you receive your credit report, review it carefully to ensure all of the information is correct. Even the slightest error, such as a mistake regarding the amount of your credit limit on a credit card, may have a negative effect on your credit rating.
Tip #2: Pay Your Bills on Time
The next step toward improving your credit rating is to make sure you are paying your bills on time. A history of late payment will have a negative impact on your credit rating, but a consistent history of on-time bill-paying will go a long way toward improving your credit score.
Tip #3: Pay Down Your Credit Cards
Carrying a large balance on your credit cards will negatively affect your credit rating. What is particularly important is how close your balance is to reaching the line of credit that has been granted to you. Carrying a $5,000 balance on a credit card with a $20,000 line of credit is not nearly as detrimental as carrying a $5,000 balance on a credit card with a $5,500 credit limit. Similarly, carrying $5,000 worth of credit card debt is not as detrimental if it is spread out over two or three credit cards as it would be on one card where your credit limit is being pushed.
Tip #4: Pay Off Debt
If you have the financial means to do so, it is in your best interest to pay off as many of your debts as possible. The less debt you have, the less of a financial risk you are to mortgage lenders. The lower your risk, the better rate you can expect to receive.
Tip #5: Maintain Employment Longevity
Individuals with a solid work history are considered less of a risk than those who have recently switched jobs. If you are considering making a career change, wait until after you have taken out a loan and closed on your new home.
About The Author - Kevin Koitz works with buyers and sellers with Georgetown real estate and other Maryland-area homes as a Realtor with the Koitz Group.