We all want the lowest mortgage rates possible when looking into a big home mortgage, and one of the largest controllable factors here is credit score. Your credit score will help determine not only which loans you can be approved for in the first place, but also the rates and other details that are vital to your financial profile.
At Community Lending Group, we have numerous mortgage options available for people with all ranges of credit scores. The higher yours is, though, the more options you’ll have. Here are some tactics for keeping your credit score high ahead of a new mortgage.
One of the simplest ways to ruin credit is through basic mismanagement of daily spending and debt ratios, but there’s a nice simple rule here to help you out: The 20-10 rule. It states that you should never let credit debt run higher than 20 percent of your yearly post-tax income, and you should never allow yourself to use more than 10 percent of your monthly income to pay back credit card debts.
If you’re unable to stay within these thresholds, it’s time to evaluate whether you’re making the right financial decisions. If it’s possible to be significantly more strict than this, do it – your score could get even higher.
Another quick way to torpedo your credit is to miss payments or pay late, and in today’s modern age, this should never happen. Online banking allows you to schedule and plan payments, meaning you should be on top of all of these and never risk skipping any.
It’s advisable to keep at least 15 percent of credit open, if not more, in case of emergencies or unexpected large expenses. If you’re forced to use credit for these and max out your debt ceiling, this will lower your score.
Credit score reflects your ability to pay down active debt, so a great booster is taking on “easy” debt that you know you can repay without issue, and quickly. Maybe these are a couple basic bills, or even items like groceries or gas that you’d be paying for naturally anyways. As long as you’re diligent and sure to pay them back quickly, these kinds of tactics will help raise your score.
For more information on credit score, or to find out about any of our other mortgage company services, speak to the brokers at Community Lending Group today.