Whether you are looking to buy a home or refinance your current one, your credit score is critical to the type of loan financing you can get. The good news: there are several things you can do to improve your credit situation — even if your picture is less than ideal right now. Over time, you can improve your credit by as much as 50 to 100 points, depending on your situation. This process is simple, but can be time consuming.
Know Your Current Credit Picture
If you're not sure what your credit score is, you can pull a free copy of your credit report once per year at AnnualCreditReport.com to see the factors affecting your score and make sure the information is current and correct. The first step to improving your credit is understanding the factors that affect it in the first place.
Factors That Affect Your Credit Score
- The amount you owe on revolving and installment debt
- The length of your credit history
- Number of credit inquiries
- On-time payments
- Closed accounts
- Responsibility of credit use
Even if you have blemishes on your credit record, you can resolve these over time. It's important to start looking at your situation now if you'd like to buy a home in the near future.
Make a Plan
Once you understand the factors affecting your credit, you can make a plan to improve your score. Here are our most popular strategies for improving credit scores to help buyers obtain financing.
Your balances are too high
- Keep balances low on credit cards and other revolving debt — stay under 50% of available credit
- Pay off debt rather than moving it around
- Don't close unused credit cards — always keep the oldest one open, as account age is a factor
- Don't open new credit cards you don't need
Your credit history isn't long enough
- Try not to open too many accounts close together — new accounts lower your average account age
Too many credit inquiries
- Shop for credit or loans within a short period of time — try not to let the process drag on longer than 30 days
Problems with prior credit use
- Demonstrate responsible use to counteract past history — open a new credit line and keep it current with a low balance
- Pay bills on time — even a single late payment can affect your score dramatically
- Only open new credit accounts when you truly need them
- Use credit cards responsibly — keep payments on time and revolving balances low
- Know that closing an account doesn't make it go away — it stays on your report as a closed account
Regardless of your prior situation, we can help you understand your home financing options. We are happy to sit down and discuss your credit picture and provide expert recommendations — to help improve your credit score enough to buy, or to obtain better loan options and rates.
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Jerry personally reviews every file and responds within 1 business day. Start with a no-obligation consultation — no call centers, no runaround.
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