If buying a home is on the horizon, it’s never too soon to start building credit for a mortgage. The better your credit score – and your overall financial health – the better interest rates and terms you can secure. Long term, that could translate into thousands of dollars of savings. Building credit takes time, but there are some key and relatively simple steps that can speed up the process. The team at Professional Mortgage Solutions works with people in Rego Park, NY, to help people through the entire journey of buying a home. Read on to learn more about building credit for a mortgage and contact us with any questions.
Pay Down Accounts One-by-One
If you have high-interest credit cards or other high-interest debts, tackle paying off those debts first. Rather than dividing your monthly available funds among several credit accounts, putting a larger amount to pay off the highest interest cards first can help improve your credit. Remember, it’s still important to make at least minimum payments each month on any debts you have and stop making any new purchases with credit unless you absolutely must.
Consider Personal Loans
In many cases, getting out from under high-interest debt can seem impossible. You may be able to secure a personal loan to pay off your high-interest debts, which will stymie the interest you accumulate and ensure you have steady monthly payments. Check with local banks and credit unions, which often have more competitive interest rates than large national banks, especially if you have already established a relationship with one.
Get to Know Your Score Intimately
With the internet today, it is easy to learn about and keep track of your credit score on a regular basis. Several websites offer free credit scores for the three major credit bureaus – Equifax, Experian and TransUnion. Each reports a score based on a scoring model ranging from 300-850. There are a few standard factors that affect each of your credit scores. Some of these you can control, while others you have less control over. They include:
- Your payment history
- Your length of credit history
- The breakdown of your credit among credit cards, auto loans, and more
- How much debt you have compared with how much available credit you have
- How many inquiries are on your record
Leave Old Lines of Credit Open
We highly encourage anyone considering buying a home to stop using credit cards and taking out any new loans. However, we do encourage our clients not to close their old credit accounts, even once they’ve zeroed out their balances. As we mentioned, the debt to credit allowance ratio makes a difference in your credit score. By keeping accounts open, you maintain the high credit allowance part, without contributing to your debt ratio.
Bonus Tip: Save for a Down Payment
If you’re taking the time to build your credit score to secure the best interest rate on a home loan, you can also begin to contribute to a down payment savings account. If you contribute even a small amount each month to an account set aside especially for your down payment, you’re doing a lot to improve your chances of getting approved for a mortgage, and one with a great interest rate.
Get Started Today
For more information on building credit for a mortgage loan, contact Professional Mortgage Solutions in Rego Park, NY. We can look at your current finances and offer advice on how to proceed with your journey towards owning a home.