4 Ways to Build Your Credit Score So You Can Buy a Home
Buying a house is a milestone everyone's life, so it's no wonder that you are jumping at the bit to get it done. Your credit, however, is holding you back. Your credit score a huge determining factor on if you are accepted for a home loan or not. If your score is low, chances are, you will not be approved. Below a few things that you can do in order to start building your credit score to make being accepted for a home loan much easier.
Learn How a Credit Score Works
Many people do not understand how a credit score actually works. For instance, did you know that your credit utilization ratio makes up about thirty percent of your credit score? Not many people know this so they tend to pay a credit card bill off all at once. Paying a credit card bill off all at once doesn't not help your credit standing. While it helps you stay out of debt, it does not bring your overall score up, which is what you need in order to be approved for a home loan. Instead of paying off your credit card in full every time you use it, pay if off over the course of a few months.
Monitor Your Credit Report
Many people focus solely on their credit score and do not give much regard to their full credit report. For example, you may find that your credit score is improving, but there might be some inaccuracies in your report that are preventing it from being higher. You need to stay on top of your credit report so that if there is something on there that shouldn't be you can take care of it as soon as you see it. You are allowed to have one free credit report once a year, so be sure you get on top of that.
Don't Help Someone Else With Their Credit
It's normal to want to help loved ones by co-signing for a car, but this could be the worst thing you can do for your credit. You can never be sure if your loved one will pay their monthly payments. Even if they don't mean to fall behind on payments, an unplanned hardship could send the entire loan into default. Once that loan is in default, you will also be held responsible for the debt and your credit score will plummet drastically.
Pay Attention to Detail
Applying for a simple credit card is the easiest way to start establishing credit, however, if you don't read the fine print, you will find your credit in worse shape than it was before. You need to fully understand what you are getting yourself into with interest rates and late fees. Interest rates and late fees pile up and at some point will you find yourself unable to pay any of it off.
Before buying a house, you need to make sure that your credit is built before you are approved for a home loan. Just starting out, you may not have the credit score needed in order to ensure an approval. By following the tips listed above, you will be on your way to fulfilling your home buying dreams in no time. For more help along the way, contact services like Central Virginia Realty.