As you may or may not know, 850 is the best possible credit score that you can get. While it may seem out of reach, there are actually quite a few people who crest that mountain and reach the top. Careful budgeting and detailed attention to every aspect of their financial picture are the umbrella tactics that these high scorers use to get and maintain that score. These are tactics that you should be using, too. If you’re looking to buy a home in 2018, here are three tips that will help you get a better grip on where your credit is and where it needs to go:
1. Just shoot for a 720 score. If 850 seems out of reach, lower your sights to 720 instead. With this score, you’ll still have lenders fighting for your business and you’ll still be offered the best possible interest rate in most instances. This will also give you the lowest possible long-term loan costs of any consumer.
2. Set up automatic payments. According to CreditCards.com, a good 35% of your credit score is taken from your payment history. You may have missed payments in the past that you have to deal with now, but you certainly don’t want to make another mistake while you’re preparing to buy. Just make sure that there is enough money in your account to cover the payments on the day that the money will be coming out. If you’ve been busy moving funds into a savings account for a down payment, you’ll want to set a reminder to put money back into the account that your automatic payments are attached to.
3. Watch your credit limits. Banks don’t look kindly on those who use all of their available credit because it gives the appearance that you aren’t living within your means. Available credit is actually the second-most important factor in your credit score. Experts recommend keeping your balance on each card under 50% of its limit. Getting that number to 30% or 20% is even better. However, don’t pay the card down too much. While a zero balance might indicate that you are financially savvy, banks like to see responsible credit management instead. This means using your cards and paying down the balance to a reasonable level this month.
If you have any questions for us about your credit, what you can do to improve it, or anything else related to real estate, give us a call or send us an email. We look forward to hearing from you soon.