When you’re purchasing a home, your credit score matters. After all, your score will play a major role in whether or not you will get approved for a mortgage at a rate you can afford.
But, what if you need to improve your credit prior to applying for a mortgage? Many potential homeowners find themselves in this position and as such, need to know what to do (and what not to do) to boost their credit. And in this article, we discuss the top five mistakes to avoid when you’re looking to boost your credit. Let’s get started!
- Cancel Old Credit Cards/Request Limit Reductions
Did you know that 15% of your credit score is determined from the length of your credit history? It is and as such, cancelling old cards will make it seem as if you have more debt than you actually do (because your amount of available credit will decrease).
Relatedly, you shouldn’t request to decrease your limits either. Doing so will also make it appear as if you have more debt than you do, having the same impact as cancelling old cards.
- Staying Current on Only Some of Your Cards
We all have months where we must prioritize where we spend our money to pay off debts but you can’t fall behind on your cards! Approximately one third of your score is determined by whether or not you pay your cards on time and as such, it’s vital to stay current on every card.
- Having Too Much Credit
Was there a point in your life where you had to open credit cards to balance all of your purchases? Doing so may not seem like a big deal at the time but unfortunately it will influence your overall credit score.
If you have too much credit, you may be viewed as a risk because you could accumulate a significant amount of debt rather quickly. As such, you should avoid signing up for new cards (particularly impulse decisions at stores for discounts) since doing so will further jeopardize your chances of receiving an attractive mortgage.
- Maxing Out Credit Cards
You never want to reach your credit limits when managing your debt. After all, maxing out cards will negatively affect your credit, even if you’re staying current on your payments.
Don’t buy what you don’t need. Doing so will help you pay down the cards and manage your debt more effectively (especially when you’re looking to improve your credit score.
- Never Avoid Opening Cards or Securing Loans
Some individuals have the opposite problem than many others: They don’t have enough credit to build up their score. As such, it’s important to not fear cards or loans and instead, open and use them effectively.
For example, you may want to open one credit card for a store you shop at regularly. By using it on a frequent basis and paying it off each month, you’ll build credit that will give you a much better deal once you’re ready to purchase your home.
United Real Estate Can Help You Purchase Your Home
If you’re building credit in the hopes of purchasing your first or next home, the team at United Real Estate can help!
Since 1925, our team has worked across the United States to provide guidance, support, and expertise to homeowners just like you. Contact us to begin the search for your home, today!