If you’re looking to buy your first house, check your credit score first.
It’s one of the most important factors in determining whether you’ll qualify for a home loan, and it can affect the interest rate you’ll pay if you’re approved for one. How important is it?
Banks’ best interest rates go to borrowers with a score of 700. Anything under that can cost you thousands of dollars, advises Bankrate.
You can obtain a free copy of your credit report once a year. Look closely for errors. If you find any, contact the credit reporting bureau that issues it (Equifax, Experian and TransUnion) and have it corrected, adds Bankrate. Look for accounts that aren't yours, late payments that were actually paid on time, debts you paid off that are shown as outstanding, or old debts that shouldn't be reported any longer. (Those should be removed after seven years, except bankruptcies, which can stay for up to 10 years.) You can check your report for free at www.annualcreditreport.com, or by calling (877) 322-8228. If your score is above a 760, you’ll qualify for the best interest rates. Any score above that won’t make any difference, says Bankrate.
Once you’ve corrected errors in your credit report, there are also steps you can take to improve your credit, or FICO, score, according to FICO itself. Always pay all your bills on time every month, keep your credit card balances low, and don’t open any new credit if you don’t have to.
One thing you should never do is closed any unused accounts you may have. That will only raise your debt-to-income ratio - DTI - which makes it harder to get a loan approval. The more money available to you, the more likely you are to be approved.
Most importantly, pay down your credit card balances, which can boost your credit score quite a bit, adds Bankrate.
Inland Real Estate Group
201 E Veterans Parkway
Yorkville, IL 60560