If you’re considering buying a house (or a car, or a business, or anything else that requires a loan), be aware that lenders will use your credit score to determine whether to grant the loan, how much to lend, and cost. of the loan.
Because credit scores consider so many variables, they can predict with great accuracy who is likely to repay loans and who is likely to default. Credit scores are based on the number of open accounts you have, your level of debt, and your repayment history. Credit scores range from 300 to 850, with higher scores indicating greater creditworthiness – a good score is considered to be 670 and above.
Your financial behavior affects your score. You can improve your score, but it’s not a quick process, so if you’re thinking of buying a house and need a loan, now is the time to figure out where you stand and start consolidating. things if necessary.
You can check your credit rating at www.creditkarma.com. Some people think you’ll damage your credit score by checking it regularly. you won’t. If banks or other financial institutions frequently check your score, this will send a red flag, but as an individual, you can check your own score without negative consequences.
Pay your bills on time every time
The first and most important way to improve your credit score is to pay all your bills on time every time. If you’re having trouble paying your bills on time, sign up for autopay. Most credit card companies, utilities, and other service providers with recurring bills are happy to set up automatic payments, so as long as you have money in the bank to cover automatic withdrawals, your credit score will benefit from this arrangement.
If you know your payment will be late for any reason, such as a family emergency, contact your creditor before your payment is due and explain the situation. As someone who handles loans, I can tell you that I have waived many late fees and opted not to report late payments for those who contact me.
If, on the other hand, I have to stalk you to get paid, I’m much less likely to be sympathetic. It always amazes me when people who haven’t returned my calls or answered my emails, burst into my office after receiving my payment or departure notice demanding a break. I’m not interested in your gory story if you’re rude, especially if you’re rude to the receptionist who doesn’t deserve your bad attitude. At this point, I don’t care how good the excuse is for your late payment.
Don’t max out credit cards
Another way to improve your credit score is to keep your credit utilization around 30% or less. This means that if you have a credit limit of $12,000, you don’t want your balance to go above around $3,600. Lenders want you to have a cushion, so if something goes wrong, you can borrow against existing credit (rather than missing your payment).
Correct the mistakes
Finally, it is important to periodically check your credit report and correct any errors you find. I once discovered that even though I paid on time, a lender marked my payments as late. Come and find out that his company was penalizing debtors for failing to process payments in a timely manner. They immediately corrected their error and reported their error, improving my credit rating.
Often, the better your credit score, the lower your fees and interest rates. A good credit rating won’t allow you to borrow more than you can repay, but it will allow you to stretch your hard-earned cash into a loan that could land you the home of your dreams.
If you have any questions about property management or real estate, please contact me at [email protected] or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery. To view previous articles, visit www.selzerrealty.com and click on “How’s the Market Going”.
Dick Selzer is a real estate broker who has been in the business for over 45 years.