How to improve your credit score

Credit scores rule your mortgage. And with so many people in debt because of the recession, credit scores are dropping. For those people who want to purchase a new home, it’s wise to stop first and look at your credit report. A credit score of 720 is considered excellent, but if you don’t have a 720, don’t fret. The average credit score in America is 692, which means most of us don’t qualify for the top tier deals.

If you’re shopping for a home, a score of 640 could still qualify you for a mortgage, but you won’t be getting the best deal. A half a point higher in your interest rate could translate to $100 more per month in mortgage payments and $25,000 in total interest—or more, depending on the amount of your loan.

With a few adjustments, you can gain the necessary points to drive up your credit score.

  • Pay on time. Your payment history accounts for 35 percent of your total credit score, so late payments will cost you!
  • Pay down your credit cards to reduce your debt-to-income ratio. For example, reducing a $300 debt to just $10 could save you $2,000 in discount points. The total amount you owe is factored in as 25 percent of your total credit score.
  • Keep your debt to no more than 25 percent of your credit limit. If you have a $4,000 limit on one card, keep the balance to no more than $1,000. If you have a $4,000 limit and $2,000 on one card, you could transfer some or all of it to a card with a much higher limit, as long as the balance doesn’t exceed 25 percent of the total.
  • Don’t apply for new credit cards while trying to boost your score. Every time you do, the inquiry is reported to the credit bureaus. You don’t want to be viewed as someone who is “collecting” credit and might end up with more debt than is manageable.

Check your credit score before you start home shopping. Once a year, you can get a free credit report from Bring that report to talk to a mortgage professional, who can help you determine how much of a mortgage you qualify for, as well as the rates and costs. At Stylecraft Builders, we work with the helpful heroes of Wallick and Volk. Talk to them and then contact us to find out how to get into a affordable, new home.



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