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If you’re looking for a mortgage of any size or type, credit score is going to be an important factor. Your credit score will go a long way to determining which kinds of financing situations you’ll be eligible for, as well as the ranges you can shop in when searching for a new home.
At Primary Residential Mortgage, we have financing options available for folks with all levels of credit score. Those with higher scores, though, will typically have many more good options available. Here are some tips for keeping credit score high ahead of financing a new home.
20-10 Rule
Many financial advisors will recommend a very basic rule for credit, titled the 20-10 rule: Never let credit card debt reach higher than 20 percent of yearly post-tax income, plus never use greater than 10 percent of your individual monthly income to pay down credit card debt. Staying within these limits, or even tighter if possible, will keep certain debt rates that are vital to credit score from swinging too far in any particular direction.
No Late Payments
Late or missed bill payments are some of the simplest ways to lower your credit score. One element tracked in credit score is on-time payment rate, and you’ll be docked heavily if yours is too low. Online bill payment makes this a completely unacceptable outcome in today’s modern age; simply set automatic payments up for any areas you frequently forget.
Purposeful Debt
Much of credit score has to do with how well you consistently use your credit, but then also pay it down in an acceptable time period. For this reason, a quick way to goose your score a little is to take on a bit of “easy” debt – debt you know you can pay without any trouble, and in fact may have otherwise not even put on your line of credit. Repaying this debt quickly and without missing any payments will help raise your credit.
Emergency Funds
If you can, try to keep at least 15 percent of your credit or more open at all times in case of emergencies. If you’re forced to max a card for an emergency or one-time event, this will reflect negatively on your score.
Want to learn more about credit score and how it factors into your mortgage application and home search, or interested in any of our other mortgage services? Contact the pros at Primary Residential Mortgage today.
*The views and opinions expressed are my own and do not necessarily represent the official policy or position of Primary Residential Mortgage, Inc.