Preparing to Buy a Home: How Can I Improve my Credit Score?

As a prospective homebuyer, don’t let your credit history stand in your way when securing a home loan. The bank uses your credit score to predict your risk as a borrower; the higher the number, the better risk you are, and the more likely they are to approve your loan.

The Fair Isaac Corporation (FICO) reports your loan information to the three major credit bureaus: Experian, Equifax, and TransUnion. Each credit bureau calculates your FICO score based on factors such as your payment history, how much you owe, what types of loans you have, and how long you’ve had them.

• Your payment history, and how much you currently owe, count for 65% of your score. Always pay your bills on time and keep your balances low.
• You can improve your credit score over time, even if you have a bankruptcy, foreclosure, settlements or liens in your past. Starting now, always pay your bills on time; on-time payments are the most important factor in achieving excellent credit.
• Don’t max out your credit cards, keeping your balances less than 40% of your available credit. If possible, maintain a mix of loans. Housing loans are best, because they’re the most difficult to get. Auto loans come in second, and credit cards bring up the rear.
• Don’t close out old lines of credit, because lenders prefer customers who maintain long banking relationships.

If you follow these tips, reduce your outstanding balances and pay your bills on time, your credit history will improve and you may qualify for a lower-interest home loan. And when that time comes, call me at 317.777.1805  or email me at Scott@LacySells.com to help you find your perfect home.