Many factors come into play when you are buying a home, income, credit and down payment are the main areas you need to focus on. How does your credit score affect your ability to buy a home?
Qualifying for a lower mortgage interest rate can save you thousands over the life of the loan. Your credit score can affect the interest rate you get, it can also affect your insurance costs. If you do not have 20% down, it can affect your mortgage insurance rate.
There are several different factors that go into your credit score. Here are the main areas you need to watch for:
- Payment history. Making your payments on time is a huge factor in your credit score.
- Credit Usage. This is another important area of credit scores. The more your available credit, the better. Ideally you want to keep your credit card balances at about 30% of the available credit. Meaning if your limit is $1000, you want to keep the balance under $300
- Length of credit history. Older accounts with positive payment histories can help your score. Recently opened accounts can lower your score. Try to keep older accounts open.
- Number of recently opened accounts. Opening new credit cards can hurt your score
- Types of credit. Ideally you want a mix of installment loans, credit cards and a mortgage.
With the holidays upon us, it’s easy to use credit cards to buy things. Make sure you pay off the credit card balances if possible. Try not to overspend! Time heals everything when it comes to credit, it just may take a while. If you spend more on credit and need to improve your score, look at paying down your credit card balances. That can help improve your score quickly.
Hope you have a wonderful holiday season!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
