Credit score plays a huge role in determining the rate you are getting for a mortgage. Unfortunately, many people have low-end credit scores that won’t even get them a single lender to look their way. Illinois native Melissa Chinwah found her credit score at an abysmal 348 after marital issues. She had a repossessed car on her report and even struggled to find housing for her and her two children. With a plan of action and added motivation, her credit score gradually came back up to 648. Melissa didn’t just snap her fingers and had her credit score change overnight. When it comes down to it, it’s all about patience and regular payments. If you are like Melissa, these tips will keep you on the right track.
When you take out a loan, you’re obligated to fully repay it back. With this being said, expect to see your credit score fall substantially. The reason for this is once you have taken out your loan, the amount is going to be one of the largest that you will ever take out. Your credit score is a value that represents your ability to pay out of debt. Knowing this, the banks want to know if you are capable of holding your end of the bargain by paying your loan back.
Pay on Time
Keep in mind that paying your bills on time is a necessity. If you want to raise your score back to where it was prior to your mortgage, you need to make your payments a priority. Setting up automatic payments is also helpful so you don’t forget.
Keep a Low Debt-to-Income Ratio
Be sure that your debt-to-income ratio stays below 28% before applying for a mortgage. By keeping it low, the good proportion will positively impact your credit score. Your credit history also plays a role so continue to build good credit history and you will slowly see your credit score naturally rise back up.
Summing it all Up
By being responsible, you will end up seeing an increase in your credit score after a period of time. Make sure that your payments are on time and continue to build up your credit history. Don’t be discouraged by the fact that your score lowered, because most people are in the same situation. Fiscal responsibility is the most important responsibility when it comes to borrowing.
Bio: Kuba Jewgieniew is the founder of Realty ONE Group, a real estate brokerage firm that provides ethical, professional, and results-driven services to every property owner and prospective estate buyer.