Did you know credit plays a big factor in the home buying process? If you’re still learning, that’s okay! We’ve got you covered. Read to learn why your credit matters when buying a home, and how to maintain good credit!
Why is credit important during the home buying process?
Having good credit increase your chances of qualifying for a mortgage, and the better your credit is, the better interest rate you may get! So, how can you maintain good credit? Firstly, recognize that building credit takes time! And, there are some things you can do to keep your credit looking good!
01. Always pay on time – This one is very obvious but also very important. You must make any payments to your rent, other bills, credit cards, loans (including student loans), etc., on time! Paying bills on time is the biggest influence on your credit, so this should be taken seriously.
02. Debt to Income Ratio – Your ratio of how much debt you have in relation to how much income you earn will affect your credit. You’ll want your debt to be minimized as much as possible to have a better ratio!
Diversifying your credit means having a mix of credit sources.
03. Student Loans – Take another look at your student loans. You’ll want to make these payments on time of course, but even if you do this, they may still be affecting your debt to income ratio as mentioned previously. Therefore, the size of the payments you make on these loans also matters.
04. Don’t close out credit – Closing out a credit account, such as a credit card, may seen like a good idea at first glance, however, doing so will actually lower your current credit availability. If you wish to no longer use a specific card, don’t close it; just use it lightly for smaller purchases and make those payments on time.
05. Consider Diversifying – Diversifying your credit means having a mix of credit sources. Having a variety ( credit cards, student loans, car loan, etc.) may help boost your credit. Only do this if you are able to make the payments on all the accounts. However, if you are planning on buying a home very soon, you shouldn’t open a new account.
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