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How to Improve My Credit Before Buying My First Home

Everyone would like to achieve the American dream of success through their own hard work, and an undeniable part of realizing that dream is home ownership. Signing for the title to a new home and stepping through the door for the first time of a house that is yours alone is a unique experience. But if your credit score isn’t where you’d like it to be and you’re ready to apply for a mortgage, you're probably asking yourself, how do I improve my credit?

Waiting until you’ve found the perfect house before learning your credit isn’t good enough is a recipe for disaster. A low credit score could potentially either disqualify you entirely from a mortgage or raise your interest rates to less than ideal levels. A higher credit score can mean saving money on mortgage interest payments. With so much riding on the state of your credit score, why not take a few simple steps now to improve your credit score that can help you get preapproved for a mortgage and take a step towards your dream home? Start early, be consistent and follow these 6 simple steps to raise your credit score before buying your first home!

1. Never miss a payment: Good credit starts with paying all bills on time, and it's never wise to miss payments to save for a down payment. Showing that you can pay off your debt with on-time monthly payments will help raise your credit score and can help make you look like a reliable candidate for a mortgage.

2. Stay under 30% credit usage: The percentage of total revolving credit (credit cards) used is important, and the lower the better for your credit score. The reporting agencies recommend maintaining your total usage under 30% at any point, but also to pay off balances as soon as possible.

3. Hold the course: Leave older credit cards open and don't open new accounts unless needed. Keep in mind that some lenders do require applicants to maintain three open lines of credit for a year to be considered for mortgages.

4. Pay off debt, don’t just move it: Moving debt around by using other cards or lines of credit to pay something off is not recommended and will most likely not help improve your credit score. Commit to paying off certain debt the good old fashioned way to help improve your score.

5. Consolidate cards: If you're paying down several credit cards each month, focus on paying off the highest interest cards first and then focus on using only one or two cards moving forward.

6. Repeat to yourself: Improving my credit takes time. It takes months or even years. Missed payments disappear after seven years and bankruptcies after ten. Patience and consistency are key, since a credit score's purpose is to demonstrate your reliability to pay over time. If you’re having trouble fixing your credit score on your own, there are agencies that may be able to help work with you to do so the right way.

Buying your first home is exciting, but you want to be sure to take the steps in the right order to ensure you get the right mortgage, interest rate and monthly payment for your financial situation. To learn more about improving your credit and how to best set yourself up for home ownership, download our eBook now!

Download the First Time Home Buyer Education eBook now!

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