Learn the Tips That Can Help You Build Credit to Buy Your Dream Home

Your life is affected in numerous ways by having bad credit. Bad credit not only makes it more difficult and expensive to obtain any loan—for homes, cars, or even cellphones—but it may also give the impression that you lack responsibility to potential landlords and employers. Keep reading to learn more about how you can build credit. Then contact Berkshire Hathaway HomeServices at (310) 373-0021 if you are ready to buy a Southern California home.

The history of FICO scores

The Fair Isaac Corporation’s FICO scores, which are used to assess a borrower’s creditworthiness for banks and other lenders, alter with each updated credit report and each new lender inquiry. The good news is that you have the ability to raise your scores if you so want.

Factors used to determine your credit score

Start by being aware of what creditors, employers, and landlords are looking for: prudent credit usage. Your credit ratings are determined by algorithms that place various weights on a number of factors. Payment status (on-time, late, or missing) is the most significant factor and accounts for around 35% of your FICO score.

The credit usage ratio compares the amount of available credit to the amount of credit that is actually being used is another important factor. You should try to keep it under 30%. Total debt, including loans, credit card balances, and other accounts will be taken into consideration, as will the variety of your credit accounts. For instance, lenders do not want all of your credit to be used at clothes retailers.

The age of your accounts matters. Hard inquiries on recent credit applications will affect your score too. Once a year, you may check your credit scores for free; this is referred to as a soft inquiry. If you compare mortgage lenders who access your credit ratings, you’re also not punished with a lower credit score. Bankruptcies and civil judgements, including those requiring the payment of alimony and/or child support, are going to affect your credit score.

The importance of getting a copy of your credit report

Obtaining a copy of your credit reports and scores is the best approach to determine what has to be fixed. Once a year, you may obtain these reports for free from Equifax, Experian, and TransUnion’s three credit agencies, or you can pay a charge to obtain a three-bureau report. Any deficiencies will be explained in the report so you’ll know what needs to be rectified.

In the meanwhile, you can take action. Revolving credit cards should be paid off or paid down, but accounts shouldn’t be closed. Do not combine your credit cards. A little balance on several cards is preferable to a big amount on one. Installment debts, such as school loans and vehicle loans, should be paid off next since they are less dangerous than revolving credit while having higher dollar amounts.

Keep credit card balances low or near zero, and refrain from requesting further credit. Pay all bills on time, at least the minimal amount required, and in full. Lenders value a history of on-time payments. Compare lenders at once. It is normal to get several queries from mortgage lenders, but avoid spreading them out across weeks or months.

Keep in mind that the ability to repay the mortgage lender’s loan is what they are most concerned about. The work and debt payment history are the most crucial variables. The greatest strategies to establish and maintain your credit ratings are through security—long-term, on-time credit payments.

If you are looking to obtain financing for a home, or you are ready to start searching for the perfect home, Berkshire Hathaway HomeServices can help. Contact us at (310) 373-0021 to get started.