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Buy a Home - Improve Credit Score - Haring Realty

Before looking at Mansfield or Ashland homes for sale, many would-be buyers take time to improve their credit scores. As a general rule, the better your credit is, the easier it is to access home loans on favorable terms. That usually means better interest rates and saving thousands over a mortgage's life.

Our REALTORS® have helped many clients understand how to tackle this process. We have spoken to many people who have put off their plans to buy a home due to their low credit score, even when they have substantial current income.

Luckily, you can improve your credit score in 2021 no matter where you start from!

Your credit score is a value between 300 and 850. For the average private home loan, lenders generally look for a credit score of at least 620. If you want a Jumbo Loan, you'll need anywhere from 700 to 740. However, some special programs have lower requirements, including those aimed at first-time homebuyers.

For example, if you qualify for a Veterans Administration loan, you will only need a credit score of 580. The same is true of an FHA loan. And if you are buying a home in a rural area, you might have access to the USDA home loan: The minimum credit score here is 640.

Five different factors make up your credit score:

  • Payment history

  • Total amount owed

  • Length of credit history

  • New credit opened

  • Types of credit

A history of on-time payment is the single most important element in determining your credit score. It is also wise to have less than 30% of your available revolving credit – like credit cards – in use at any one time. For what it's worth, starting your credit history earlier in life will also help.

Here's how you can improve your credit score in 2021:

  • Pay at Least the Minimum Payment Every Month
    For a healthy credit score, paying your bills on time should always be your top priority. Even if you can't pay off a large amount, always submit the minimum payment on time. Late payments are not always entered on your credit record immediately, but they could be – and if a payment is 14 days late, it is almost always listed.

  • Pay Off High APR Credit Debts First
    The higher the Annual Percentage Rate on a credit card, the more interest you will pay every month. As a result, less of the minimum payment will go toward the principal. It's usually best to pay off high APR debts because you'll save more money that you can use to pay off your lower APR obligations in the future.

  • Don't Close Paid Off Accounts
    Because the amount of credit you have available has lots of weight in your credit score, avoid closing old accounts as you pay them off. When it comes to credit cards, the best thing to do is pay the balance in full and then use the card only as often as required to keep the credit line active.

  • Avoid New, Large Obligations
    If you're raising your credit score in preparation for a home buy, avoid any other large obligations. No one will mind if you have old student debt, but don't take out a new car loan or buy expensive electronics with store financing. This not only protects your credit score but helps persuade lenders that you are reliable.

Contact us to find out more about buying a home.

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