When applying for a mortgage one of the areas all lenders will look at is your credit, which show lenders your history of repaying debt. Credit scores can range between 300-900 and the higher your score, the better you look to lenders. Having a score above 700 means you are low risk and more likely to pay off your debts, where anything below 620 means you are high risk, meaning it may be difficult to get a loan.
If you fall into the high risk category you may want to hold off on applying for a mortgage until you rebuild your credit. Taking the time to rebuild your credit will give you better options when getting a mortgage. Here are some things to know when trying to rebuild credit.
- Make payments on timeMissing just one payment can have a negative impact on your credit score. Set a reminder for yourself and make sure you pay at least the minimum amount required each month.
- Manage your debtTry to pay off debt with the highest interest first, put any extra cash you have towards paying off debt and have a plan in place to ensure you are making the highest payment possible to reduce interest fees.
- Don’t apply for new creditBe careful when applying for new credit, each time you get your credit pulled your score takes a hit. If you are trying to raise your score, hold off on applying for any new credit.
- Spend within you credit limitDon’t spend over your maximum limit, doing this is going to negatively impact your score. Know your limit and make sure you stay within it.
- Check your credit score for discrepanciesKnow your credit score. You can check your credit score online through one of the credit unions. Knowing your score will allow you to see if you are on the right track and make sure to notify the proper channels if you have any discrepancies on your report.
Follow these five steps and your will be on your way to improving your credit score.