Fixing Your Credit Score
January 10, 2023
To start improving your credit score, it helps to know what goes into making it. The factors that affect your score are:
- Timely payments: 35%
- Overall debt: 30%
- Length of credit: 15%
- New credit applications: 10%
- Types of credit: 10%
Know Your Score
You need to know what your score is if you want to get started on improving it for a home loan. According to the Fair Credit Reporting Act, individuals have the right to their own credit report, which is available from a credit bureau. You can request your report from these bureaus, the top three of which are Equifax, TransUnion, and Experian. Once you have your report, you can review it and dispute any discrepancies. The bureaus are responsible for investigating any disputes within 30 days.
Don’t Let Your Balance Go Past-Due
The most important factor that makes up your credit score is your payment history. 35% of your credit report depends on whether or not you make payments on time. The later you are on those payments, the worse it is for your credit report. Always try to pay off your credit balances in full. Not only does this keep you from incurring large interest payments, but having a “paid in full” remark on your credit report looks good to lenders considering you for a loan.
Building a Credit History from Scratch
Many first-time homebuyers run into the problem of not having a sufficient credit history. This can affect the 15% of your score that depends on age of credit. Establishing credit history can start with signing up for a credit card and using it to pay for everyday items. It also helps to set up utility payments through your credit card online. Just remember to pay off the balance on time!
Be Proactive About Opening New Lines of Credit
When applying for a loan or credit card, your bank or lender performs a “hard inquiry.” This is a review of your credit that in turn affects your score. If you submit multiple credit applications in a short timeframe, it shows up as a red flag for lenders. They might assume that you aren’t handling your finances well enough if you need multiple lines of credit open at once. It’s important that you don’t submit credit applications close to the time that you apply for a home loan.
Remember that your credit score represents your creditworthiness. Based on this number, a lender determines whether you are a high-risk borrower and if it’s a smart idea to loan you a huge amount of money. It also determines the interest rate you’ll receive from the lender, so it is worth your time to work on increasing your score.
------------------------------
RELATED VIDEOS:
Learn How to Meet FHA Requirements
A Few Tips About Your Fixed Rate Mortgage
Your Proof of Ownership Is the Property Title
FHA Loan Articles
November 26, 2024
Thinking about buying a home? One of the first things you'll want to consider doing is filling out forms to be pre-approved for your FHA mortgage. This means a lender takes a look at your finances to figure out how much they're willing to loan you. It's a smart move, but you might be wondering: "Will applying for pre-approval hurt my credit score?"
November 25, 2024FHA mortgages include a refinance option that allows you to pull equity from your home in cash. The FHA cash-out refinance loan allows the borrower to take the difference between what remains to be paid on the home and the amount of equity built up.
The FHA loan program has some competition in this area, but how do your other government-backed refinance loan options measure up?
November 21, 2024The dream of homeownership is with some from a young age. But in an uncertain housing market, some grapple with the question: Is buying a home the right move for me?
While renting offers relocation flexibility and lower upfront costs, homeownership provides a wealth of financial and personal benefits.
November 20, 2024Refinancing your mortgage offers a way to cash in on your home equity, potentially reduce your interest rate, or modify your loan term. Borrowers ready to consider have options including FHA loans and conventional loans.
While both provide avenues for refinancing, each loan type may be best for specific needs and financial circumstances. What are the differences between FHA and conventional refinance options?
November 14, 2024The home you want to buy might seem perfect, or it may have a few flaws that are acceptable in the grand scheme of things. But what about issues you can’t spot just by walking through the property a few times? A home inspection provides an unbiased, expert assessment of the property's condition, uncovering potential issues that might not be noticeable to the untrained observer.
