Tips to Boost Credit Scores for first-time homebuyers!
Hey everyone, Chris here—your Warner Robins real estate agent! In our last chat, we talked about saving up for that all-important down payment and ensuring your credit score is ready to qualify for a home loan. Today, let’s dive deeper into building your credit, especially if you’re a first-time homebuyer looking to make Warner Robins your home.
**If you prefer to watch the video. Click here.
Understanding Your Credit Score
First things first: know where your credit score comes from.
Your payment history makes up 35% of your score. That means paying all your bills—student loans, car loans, mortgages, and especially credit cards—on time or even a little early is crucial. Late payments can hurt your credit score more than anything else.
Beware of Credit Card Due Dates
A personal tip: keep an eye on your credit card statements. Some companies might change your due date without much notice, hoping you’ll miss a payment and incur a late fee. Trust me, it’s happened to me before! Staying vigilant ensures you maintain a solid payment history.
Credit Utilization Matters
Next up is credit utilization, accounting for 30% of your score. This refers to how much of your available credit you’re using. If you have a credit card with a $1,000 limit, try to keep the balance below $300. Lower is better, and zero is perfect! While you can’t control the balances on fixed loans like mortgages or car loans, you can manage your revolving credit like credit cards. Keeping those balances low can help offset the higher balances on your fixed loans.
Length of Credit History
The length of your credit history counts for 15% of your score. The longer you’ve had an account open, the better it reflects on your credit. So, if you’ve got an old credit card you rarely use, consider keeping it open. For example, I’ve got a card with a $5,000 limit that I’ve had for over 10 years. I don’t use it much, but it positively contributes to my credit profile.
Be Cautious with “Buy Now, Pay Later” Credit Options
While tempting, “same as cash” credit deals from furniture stores or other retailers can hurt your credit score. These short-term accounts (12 months, 18 months, 0% interest credit offers) often lower the average age of your accounts, which isn’t ideal for building credit. If you opt for these deals, ensure they don’t report to the credit bureaus. If they do, see if you are able to continue to use the credit account for other purchases, to keep the account active for at least 3 years.
Mix It Up with Different Types of Credit
Your credit mix makes up 10% of your score. Lenders like to see a variety of credit types, such as revolving credit (like credit cards) and installment loans (like car loans or mortgages). A healthy mix shows that you can handle different types of credit responsibly.
Leverage Your Regular Bills
Did you know your cell phone, utility bills, and rent payments can help build your credit? Contact the credit bureaus to have these added to your report. As long as you’re paying on time, they can boost your score and enhance your credit profile.
Know Your Loan Options
Once your credit score is in good shape, you can explore different loan options:
- FHA Loans: Accept scores as low as 580, but may come with higher interest rates.
- Conventional Loans: Typically require at least a 620 credit score.
- Best Loan Interest Rates: Aim for a credit score of 720 or higher to secure the best rates available.
Consistency is Key
Remember, building credit takes consistent effort. Keep setting aside at least 10% of your income to build up that down payment and savings. Regularly check your credit report through services like AnnualCreditReport.com or Credit Karma. While you might have to pay to see your actual score, monitoring your report helps you spot and correct any inaccuracies.
Let’s Make Your Homeownership Dreams a Reality
If you’re a first-time homebuyer in Warner Robins ready to embark on your homebuying journey, or if you have any questions about building credit, book a call with me.
I’m here to help you navigate the path to your dream home!
Stay Connected
Don’t forget to check out our latest video on YouTube where I discuss more tips on homebuying and building credit.
If your not sure I am the agent for you, Check out our reviews on Google.
Other related articles about finance