4 Credit Score Tips for Aspiring Home Buyers

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Purchasing a house is likely your most significant expense, making it crucial to explore avenues for cost reduction. Given that your credit score plays a substantial role in determining your mortgage rate, focusing on improving it is an excellent starting point for potential homebuyers.

Before assuming your credit score is "good enough," take a look at current mortgage rates. As of this writing, Freddie Mac reports an average rate of 7.19% for a 30-year fixed-rate mortgage loan. Considering this is an average, lower rates may be available, especially if you possess a stellar credit score. To enhance your creditworthiness, here are some tips to consider before embarking on the house-hunting journey:

  1. Prioritize Timely Payments: Ensure on-time payments, as your payment history constitutes a significant 35% of your FICO® Score. Commit to a schedule by using a wall calendar or setting up autopayments to bolster your credit history.

  2. Check Your Credit Report Early: Obtain your credit report before a lender does to address any issues. Utilize the opportunity to rectify errors or discrepancies, ultimately contributing to an improved credit score.

  3. Reduce Existing Debt: Despite anticipating a mortgage, decreasing current debt levels positively impacts your credit score. If feasible, consider paying down debts, potentially improving your financial standing and simplifying your budget.

  4. Maintain Financial Stability: Avoid making significant financial changes once the mortgage application process begins. Refrain from applying for new credit cards, making large purchases, or altering employment, aiming to sustain your existing debt-to-income ratio and provide reassurance to lenders.

Navigating the home-buying process can be stressful, especially in a challenging market. However, taking proactive steps to enhance your credit score can alleviate concerns related to this crucial aspect of the home-buying experience.

 

Source: The Motley Fool

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