When applying for a mortgage, your credit score is one of the most crucial factors that lenders consider. A low credit score can leave you in a difficult position, as your lender may not be comfortable with your ability to pay back the loan. A high credit score, on the other hand, gives lenders peace of mind that you are someone who pays what you owe and will be a great candidate for a mortgage.
In this post, we will outline some of the best ways to improve your credit score so that when the time comes to apply for your mortgage, you can go forth confidently and know that you have done everything you can to get a good rate.
Make Your Payments on Time
Whatever you have to do to ensure that you pay all of your bills on time, do it. Your payment history is one of the biggest factors in calculating your credit score. There are many ways to keep yourself on track when it comes to making payments including:
- Setting up automatic payments. The easiest way to ensure that your payments are on time is to simply automate the process. Many services offer automatic payments where you are simply alerted when a payment is triggered. All you have to do is make sure there is enough money in your account and the technology will take care of the rest.
- Create calendar reminders for before payments are due. Using either a digital calendar or a pen-and-paper version, write down the dates when bills are due each month. This will guarantee that you are aware of payment dates and that you make them on time or early.
- If a bill is past due, pay it as soon as possible. Despite your best efforts, you may miss a few payments. While one or two late payments aren’t likely to hurt your score too significantly, it’s important that you make payments as close to the due date as possible to show that you are making an effort and that you don’t let bills slip past you.
Improve Your Debt-to-Income Ratio
Student loans, auto loans, credit cards, and other forms of debt all factor into your debt-to-income ratio. To calculate this, lenders will consider all of your debt as compared to your income and determine a percentage. A DTI of around 36% is generally considered favorable and will positively affect your credit score.
Consult with a Mortgage Professional
The good news is that you don’t have to go through the homebuying process on your own. A qualified mortgage professional, like the ones at Rex Homes can help you every step of the way and can offer good advice on how which houses may be best for you based off of your credit score. If you have questions about your credit score, or aren’t sure where to begin in the process of buying a home, contact a mortgage professional today. They will be happy to assist you with any issues you may have and will help you find the home of your dreams.
