6 Strategies to Improve Your Credit Before Buying a Home

Something that can negatively affect the decision to purchase a property is a low credit score. The credit score is a three-digit number that has great importance in the American economy and speaks about how we manage our debts, our financial commitments. For example, it is very common for people who pay in cash, even if they have excellent income, to have low credit scores, because the important thing is not only how much income a person generates, but how that person manages their credits.

Most people don’t give much thought to their credit score until they need to make a big purchase or take out a loan. For most of us, a property is one of the largest investments we can make; and, a loan, in many cases, is the only way to achieve this.

When it comes to financing, a low credit score could lead to:

• Higher interest rates
• More time to be approved for credit
• More proof of income
• A higher initial (down payment)
• The rejection of the loan by the eventual lender

6 key points to improve credit:

1. Balance: Knowing your score is the first step and the most important recommendation is that you pay the balances you have on all your credit cards. This helps increase your score. It’s okay to use one of your credit cards, but always make sure to keep your monthly balances as low as possible. Experts recommend not using more than 30% of your available credit to maintain very good credit. According to the Federal government, 3 free credit reports are allowed per year. You can get this information online, but be careful, many sites that are not “affiliated” with the Federal Government may try to charge you for this report.
2. Pay on time: If you really want to increase your credit score, this is another effective way to achieve it. While it may be easier said than done, it’s important to make sure all payments to every credit card and loan you have are made on time. After 15 days of late payment, it begins to reflect negatively on the credit.
3. Don’t close accounts: As we said above, pay off all your credit cards… But don’t close any of them until you’ve applied for your mortgage. Canceling or closing a credit card can have a negative effect on your credit. Paying off your cards and keeping your line of credit open can increase your chances of getting your mortgage.
4. Open new accounts: Opening new credit card accounts can quickly improve your credit score. If you don’t make any purchases on your cards, including the new one, your credit usage average will decrease and your credit score will go up. ​
5. Large purchases: Don’t make large purchases before applying for a mortgage loan; This includes, but is not limited to, going on long and/or expensive vacations, purchasing a car, and any other valuables. Those charges can make your credit look weak.
6. Planning: Improving your credit score is not something you can do overnight. Credit repair can take months. So be patient and plan ahead.