If you are planning to use a mortgage to buy a Fort Lauderdale home, you may have some homework to do before you begin your search. Your credit score will have a big influence on how much you end up paying for a mortgage. A home buyer with a high credit score of 750 or above will qualify for the most competitive interest rates available; but today’s tightened lending standards mean that some borrowers with scores under 600 may not qualify for a mortgage at all. Those with a low credit score who qualify for a mortgage can end up paying an extra 3%-4% interest charge on every payment.
Homebuyers who realize the importance of a strong credit score, by taking proactive steps early, can save thousands of dollars. Since credit scores tend to sometimes fluctuate from month to month, it’s important to have a plan and remain vigilant. Here are five credit score tips you can put to work for you today:
1. Get Your Scores. You can’t improve your credit score until you know what you are working with. Your credit scores are available for free once a year from each of the three major reporting agencies: Equifax, Experian and TransUnion.
2. Submit Corrections. The fastest way to improve your credit score is to correct any inaccuracies. Since this process takes time – anywhere from 30 days to as long as six months — the earlier you begin, the better. To remove items that are inaccurate, verify the correct information using the dispute procedure on the respective agency’s website. The creditor has 30 days to validate the debt. If the credit agency does not receive a response to your claim, they are required by law to remove the entry from your report. Remember there are three major agencies. An incorrect item may appear on all three, therefore each reporting agency will need to be contacted.
3. Leverage Your Credit History. If you have a credit card that you haven’t been using for a while, it’s a good idea not to cancel it. Instead it might be beneficial to begin using it again. Make sure you pay the balance in full each month. This will mean that the issuer keeps reporting information to the credit bureau, which can be valuable. A longer credit history improves your credit score.
4. Adjust Your Credit Utilization Ratio. A credit utilization ratio measures how much of your available credit you are using. To improve your credit score, keep your credit utilization ratio below 20%. One way to quickly improve a utilization score is to move credit card debt onto cards with higher limits. While this will not make a difference to the amount that you owe, it will alter individual cards’ credit utilization ratios.
5. Consider A Personal Loan. If you have a friend or family member that you can borrow from, consider taking out a loan in order to pay down a portion of existing debt. By removing some of the debt from your credit report, your credit score will get a boost.
When it comes to getting a mortgage, your credit score really matters! If you would like an introduction to a terrific mortgage broker, so you can begin the conversation about your current credit score, contact us.
