Buying a house is probably the biggest expense most of us ever take on in life. Your credit plays an important role in affording you access to the best terms available from your lender. The better your credit is, the more favorable your financing terms will be.
If you wish to improve your credit, there are many options to tune up the ways you think about and interact with your credit. Here are five simple things you can do to improve your credit.
You should check your credit report regularly to know where your credit stands, and to make sure you’re prepared when it comes time to make the purchase. Consider your credit report the road map to all your credit behaviors: It’s important to know how your report will look to lenders and others when they see it for the first time.
Avoid maxing out your credit cards.
To show lenders you’re using credit responsibly, keep your spending under control and in accordance with the budget you’ve set. Keeping tabs on your spending now will also help you benchmark how changes to your budgeting will affect how you spend after your home purchase.
Pay more than the minimum balance.
Bring down the balances you’re carrying by upping your payment amounts above the minimum — this can also save you interest over the long term. You’ll want to keep that extra money in your pocket (and hopefully earning some interest) while you look for that dream property.
Avoid applying for credit indiscriminately.
Resolution to make: Seek out and accept new credit sparingly, so your credit-utilization rate won’t be seen as too high when applying for credit during your homebuying process. Lenders can be wary of applicants they feel might be trying to amass excessive credit and overspend.
Pay your bills on time.
Stay on top of your accounts to keep all your payments on time, every month — it’s even more important in the months you’re considering a big purchase like a home. It may be the most basic but most important way to show you’re consistently being responsible with your credit obligations.
Take advantage of the months before you purchase to make sure your credit rating is in great shape. You’ll have the peace of mind of knowing that when you’re ready to buy, your credit will be too.