Raising your credit score
When preparing to purchase a home, many questions arise. Luckily, we’re here to help! One of the most common topics we discuss with our clients seeking homeownership is credit scores. So, how does your credit score impact your ability to get a mortgage loan? Here’s the scoop.
Your credit score, which is calculated based on the information in your credit report, is a key ingredient in determining two things when it comes to securing a mortgage loan. Not only does it determine whether or not you qualify for a mortgage loan, it also dictates the interest rate you will pay each month. Before we dive too deep, let’s break down credit score ranges to give you an idea of where you stand.
● 750-850 is considered "excellent"
● 700-749 is considered "good"
● 650-699 is "fair"
● 300-649 is "poor"
Your credit score is calculated based on the information in your credit report, including your lending history, length of credit accounts and any incidence of collections, among other things. If you have a higher credit score, you may be eligible for lower interest rates and are more likely to be approved for your mortgage loan. The lowest credit score to purchase a home with a Federal Housing Administration (FHA) loan is 600, according to credit.com. FHA loans are great for first-time homebuyers and require a minimum down payment of 3.5 percent.
Now, just because a credit score of 600 will likely secure your home does not mean you should stop working toward improving your credit score. Part of our education program at United Housing is our credit counseling. Raising your credit score is extremely important as it can lighten financial burdens for years to come. So, how do you do it?
Pack your patience. Your credit score didn’t plummet overnight and it won’t skyrocket overnight either, but don’t panic! Raising your credit score is definitely doable, and we are here to help. Here are a few tips.
Contact your creditors to set up a payment plan.
Pay your bills on time every month. If possible, pay more than once in a billing cycle to speed the process of raising your score.
Pay off credit cards that are “maxed out” first.
Do not close unused credit card accounts. If you must close accounts, close those that are newer.
For more information on how your credit score plays into purchasing a home or on United Housing’s credit counseling services, give us a call at 901-272-1122.
