Are you thinking about taking out a home loan in the future? If so, you have to put yourself in the best position possible to not only qualify for a loan but also get the best terms possible. That means taking a closer look at your credit score. Your credit score is used by potential lenders to categorize your financial health, and a bad credit score can be an albatross when applying for a home loan. The higher the credit score is, the better your chances of qualifying for favorable terms. What do you need to do if you want to increase your credit score for financing for a housing loan?
You should ask for a free copy of your credit report once per year. The three major credit bureaus are required to give you at least one free copy of your credit report every year. They are Experian, TransUnion, and Equifax. You need to ask for a copy of your credit report because there could be mistakes on it. You do not want someone else’s financial mistakes to artificially lower your credit score. It can take a while to get some mistakes removed from your credit report, even during credit repair, so it is always better to ask for a copy of your credit report before you go through the process of applying for a home loan.
Pay Your Bills on Time
Next, you need to pay your bills on time and avoid credit card debt. If you miss a payment, the company or creditor could report your missed payment to the major credit bureaus. Then, your credit score could suffer. For example, you should always make sure you pay your utility bills on time, including your water, gas, insurance, electricity, cable, and Internet bills. You should also pay your credit card bills on time. If you have car loans or student loans, you need to pay those bills on time as well. If you have a long track record of paying your bills on time and being debt free, you can increase your credit score before applying for a low income housing loan.
Keep Old Cards Open
You may decide to switch credit cards because a different credit card better reflects your current spending habits. You should not close your old credit card. A major portion of your credit score is the length of your credit history. If you close a credit card that you have had open for a long time, you could artificially lower your credit score. Therefore, keep your own credit cards open even if you do not use them. If the credit card has an annual fee attached to it, you may want to call the credit card company to see if you can downgrade that credit card to a credit card that does not have an annual fee. That way, you don’t have to close it and you don’t get charged an annual fee that you no longer need.
Boost Your Credit Score
If you keep these tips in mind, you should be able to increase your credit score. Make sure your credit score is as high as possible before you apply for a home loan. That way, you can qualify for the best terms possible when you explore rent to own housing.
