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Marie Castecka

ABR, ASR, CSP, CPRES, RSPS, SRS, SMP
Berkshire Hathaway HomeServices Anderson Properties
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How to fix your credit to buy your next home.

May 21st, 2019



You've been saving up to buy a home, and you're ready to start looking for your dream place. But is your credit in the best shape it can be to help you qualify for a mortgage—and at the best rates available? Before you start shopping for a new house, you'll want to make sure your credit is in tip-top shape. In fact, you should start focusing on your credit at least six months to a year before applying for a mortgage. Because this is likely the largest loan you'll undertake in your life, even small improvements in your credit score can translate into significant savings. For example, say you start out with a FICO® Score of 675. According to the FICO Loan Savings Calculator, on a $300,000, 30-year fixed mortgage, you would qualify for a interest rate of 4.74% in the current interest rate environment. But if you boosted your score by just five points into the next scoring band, you could qualify for an interest rate of 4.53%—saving you $13,840 over the life of the loan. If you improved your score to 700, you could qualify for a rate of 4.35%, saving you an extra $25,158. And if you could get your score to 760, your 4.13% interest rate would help you save $39,186. Follow these four steps to get your credit in fighting shape before you apply for a mortgage: 1. Check Your Credit Reports and Scores The first thing you should do, if you haven't already, is find out where your credit currently stands. That means obtaining your credit reports from all three credit bureaus (Experian, TransUnion and Equifax) and reviewing them for errors. Make sure each credit report accurately reflects your identity and credit history. Are there any accounts listed that shouldn't be there? What about late payments that may not be correct? If errors do exist, get those corrected as soon as possible because they could be dragging your scores down. You can get your free credit report from Experian—no credit card required. You are also entitled to one free credit report every 12 months from Experian, Equifax and TransUnion at AnnualCreditReport.com. Also take a look at your FICO Score (which you can get for free from Experian) to find out where you're at. When you receive your score, you will also get some information about why your score is what it is and how you can improve it. Pay close attention to those suggestions, because that's what you'll want to focus on to improve your score over the coming months. For the most thorough breakdown of your three credit reports and FICO Scores based on each, consider Experian's 3-Bureau Credit Report and FICO® Scores product. You'll get insight into each of your credit reports and scores, as well as access to live customer support. Find more information on the factors that go into your credit score here. 2. Stop Applying for New Credit and Limit Big Purchases Don't apply for new credit cards or undertake other loans—such as a car or personal loan—in the months before you apply for a mortgage. New loan and credit applications can ding your scores in the short term, so you'll want to avoid any new activity that could harm your scores. Similarly, limit large purchases, especially if you're using credit to pay for them. Now is the time to decrease your credit usage to signal to potential mortgage lenders that you're not over-leveraged. (And even if you plan on making a big purchase with cash, consider skipping it to burnish your savings—because that will also impact your ability to secure a loan and pay for all the costs related to buying a home.) 3. Reduce How Much You Owe and Pay Down Your Debt One of the biggest factors that impacts your credit scores is your credit utilization ratio, or the amount of credit you use each month compared with the amount of credit that's available to you. Your credit utilization ratio is calculated by adding all your credit card balances at any given time and dividing that by your total credit limit. For example, if you owe a total of $2,000 on all your credit cards, and your total credit limit across all your cards is $10,000, your utilization ratio is 20%. Experts say that most credit scoring models ding your score if your utilization ratio is above 30%. So it's smart to aim for a utilization ratio under that—but don't expect your score to magically jump up if your utilization is at, say, 29%. Think of it as more of a sliding scale. The higher your utilization ratio, the bigger hit your credit scores will take. To be on the safe side and achieve the best scores, you'll need a credit utilization ratio of 10% or less. Find more details on how much credit you should use here. The best way to decrease your credit utilization ratio is to pay down your debt as much as possible and limit the spending you put on credit cards each month. 4. Focus On Paying Every Bill on Time The other factor that plays an outsize role in your credit scores is your payment history. Late payments—especially recent late payments—will significantly drag your scores down. So focus on paying your bills on time. In fact, consider automating your payments so you don't miss a bill accidentally. You might also set up text and email payment alerts to remind you when bills are due. The end.  


Comments (7)


Action credit solutions helped me remove eviction, bankruptcy and collection accounts in 10 days. They increased my score from 520 to 750 and I was able to get a loan. Im very grateful to them and wish they will continue to help the hopeless and helpless
Posted By : ambrosejasmine26
Due to a lot of hardships and circumstances beyond my control, my scores were in the ditch. It will literally take way too long for me to try sending (3 letters to the 3 credit bureaus) and waiting for the negative items to eventually be deleted. However,
Posted By : chewsmichael
Due to a lot of hardships and circumstances beyond my control, my scores were in the ditch. It will literally take way too long for me to try sending (3 letters to the 3 credit bureaus) and waiting for the negative items to eventually be deleted. However,
Posted By : chewsmichael
Wow this is great! ACTION CREDIT SOLUTIONS is really a life changer. I had 2 evictions, hard inquiries, lots of late payment including auto loan, judgement and charge offs and they were able to remove evictions, hard inquiries, late payments, judgement an
Posted By : lyla2richard
I have never heard of them, Action Credit Solutions, and it sounds kind of iffy to me. How can a company do that? It sounds too good to be real, don't you think? Marie Castecka 9365815958
Posted By : casteka
When I contacted ACTION CREDIT SOLUTIONS with their number (737) 201 7316 and their email ACTIONCREDITSOLUTIONS@GMAIL.COM , these were their exact words "I'll remove all negative items including hard inquiries, collections, late payments, evictions, bankr
Posted By : ambergreen090
I never knew that there was something like this. Im very impressed how ACTION CREDIT SOLUTIONS helped remove negative trade-lines and judgement. My two evictions and charge offs are no longer on report. I saw my credit score improved in less than two wee
Posted By : hudsonvanessa77

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Disclaimer : The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®

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