Tips for Slaying Your Credit Score

    If you or someone you know is thinking about buying a home anytime in the near future, there are a lot of things you’ll need to think about. Where to buy a home is a top concern, as is what you can afford. However, you should also know that your credit score is an equally pressing issue. If you’ve already got a great score, that’s great! If you have a less-than-stellar score, though, we’ve got some great tips to help you get it up to where it needs to be.

    I recently came across an article that details some great tips on improving and maintaining your credit score. You can read it in its entirety here, but I wanted to highlight a few of my favorite tips from the article in this email:

    Shoot for perfection

    850 is the best score you can possibly get, and while it may seem completely out of reach, there are people who actually crest that credit mountain and reach the top. “It’s the Holy Grail of all credit scores: 850. On the widely used FICO credit score scale, approximately one in every 200 people achieves perfection, at least as of a 2010 estimate by the Fair Isaac Corporation,” said The Motley Fool. Careful budgeting and detailed attention to every aspect of their financial picture are the umbrella tactics they use to get and maintain that score—and they’re ones you should be using, too.

    Or, shoot for 750

    If 850 is out of reach within a reasonable 
    timeframe (reasonable being the maximum amount of time you want to wait before buying a home), try for 750. This is the magic number for many lenders and creditors. “It puts the ball completely in the corner of the consumer rather than the lender,” said The Motley Fool. “You’ll often have lenders fighting for your business, and in nearly all instances, you’ll be offered the best interest rate by lenders, meaning you’ll have the lowest possible long-term mortgage and loan costs of any consumer.”

    Set up automatic payments

    According to CreditCards.com, a good 35% of your credit score is taken from your payment history. You may have missed payments in the past that you need to deal with now, but you certainly don’t want to make another mistake while you’re trying to get homebuyer-ready. Almost every creditor, from your utilities to your car payment to any outstanding student loans you may have, offers the option of automatic payments. This is the easiest way to ensure you never miss a payment because you got busy or spaced on the due date.

    But just remember to make sure there is enough cash in your account to cover the payments on the day the money will be coming out. If you have been busy moving funds into savings for your down payment, you’ll want to set a reminder to put money back into whatever account your automatic payments are attached to.

    Don’t be afraid to refinance

    You may end up buying a home before you get your credit score exactly where you want it to be. If you’re in an appreciating market, which much of the country is, and your score continues to rise after you close escrow, you might be in a position to refinance sooner than you think. Especially if you buy your home with an FHA loan, their streamlined refinanceprogram can potentially lower your rate without an appraisal, a credit check, or job/income verification.

    Watch your credit limits

    Banks don’t look kindly on those who have used all of their available credit because it gives the appearance that you’re not living within your means. The amount of available credit you use is the second most important factor in your score. Experts recommend you keep your balance on each card below 30% of your limit—if your limit is $5,000, your balance should be under $1,500. Of course, even lower is better. Get to 20% or even 10%, and you’ll be in great shape. But don’t go below that. While it may seem like a zero balance would indicate that you are financially savvy, banks like to see responsible credit management. That means using your cards and paying down the balance to a reasonable level every month.

    If you have any questions for me in the meantime about buying (or selling) a home, or what you can do to make sure that your credit is in great shape when the time does come for you to buy a home, don’t hesitate to reach out and give me a call or send me an email.

    I look forward to hearing from you soon!

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