5 Tips for Building Good Credit
Picture this: you are a first-time home buyer and find the house of your dreams, you have money saved up to put 20% down, you are ready to finally start this new home mortgage chapter—but, the housing application asks for your credit score. This is part of any mortgage pre-approval, whether you are applying for an FHA loan or a jumbo loan. If you have a low credit score (typically below 620 on a scale of 350 – 850) or no score at all, here are five helpful tips from this Michigan mortgage company to help you become a homeowner.
1. PAY YOUR BILLS ON TIME
The first tip is to always pay your bills on time. Whether it be your credit card bill, your rent, or your phone bill, there is no better way to improve your score. If you have trouble paying things on time, it might be useful to set up automatic payments with your financial institution so you don’t have to worry.
2. PAY OFF YOUR DEBTS
The next tip is to pay down or pay off your existing debts, preferably within a timely manner. Paying off things like your student loans can help you build up credit tremendously because it shows that you pay your obligations on time and with efficiency. Even paying in small increments is a great way to reflect that you are financially responsible.
3. ASK FOR A HIGHER CREDIT LIMIT
A simpler way to boost your score is to request a higher limit on your existing credit card. Increasing your spend ceiling and spending less each month creates an improved ratio of your credit usage. If you are approved for a new limit, this will help increase your score in the long run.
4. DON’T CLOSE YOUR CREDIT CARDS
Cancelling your credit card will ultimately hurt your credit score. When you cancel a card, it may decrease your credit utilization ratio, which is the relationship between your card’s balance and limit. It will also remove any credit history you have which will decrease your score. The best ratios to maintain are from 0 to 10 percent, any higher has a high possibility of hurting your credit score.
5. PRACTICE SMART SPENDING
When a credit agency is looking at your history, your spending habits will reflect in your score. Make sure you are creating monthly budgets for yourself to ensure that you are in a good place when your credit card bill arrives.
Overall, financially assessing yourself and what you can afford is both responsible and helpful to your score. With a good credit score, you can finally do things such as applying for a home loan or getting a mortgage refinance. Even though your score is a work in progress, these simple tips can be a catalyst to your financial future.
For more information, chat with us at callhallfirst.com or give us a call at 866-Call-Hall.