When you want to buy a home, your credit score is one of the major determining factors of whether you get a mortgage. Applicants that have a good credit score aren’t just likely to secure a loan, but they can also land an attractive interest rate.
But what is a good credit score and how can you improve your credit to get a great rate on a mortgage?
We’re sharing our expert insight so you can capitalize on a good deal without your credit standing in the way.
What is a Good Credit Score?
Credit scores range from 300 to 850. The closer to 850, the better your credit.
Generally, a credit score of 700 or more is considered good, while a score of 800 or more is considered excellent. According to Experian, a major credit reporting bureau, most credit scores fall between 600 and 750.
Credit scores are determined by many factors, including your payment history, the amount of debt you owe, length of credit history, types of credit in use, and new credit. Each factor is weighted differently and use a complex algorithm to create your credit score. Because each credit bureau reports your credit differently, your credit score may vary between bureau.
If your credit score is in the “excellent” range, you’re most likely to get loan approvals and attractive interest rates. However, credit scores that are 650 or below will have difficulty in getting approved for a loan and will face higher interest rates if approved.
5 Ways to Improve Your Credit Rating
If you don’t have good credit, there are a few things you can do to improve it. Look at these five ways to increase your credit score so you can invest in properties without paying a fortune in interest:
Maintain a Low Credit Card Balance
If you max out your credit cards, you aren’t doing your credit score any favors. Creditors will look at your available credit, and if they see you’re stretched thin, they may not be willing to give you more credit.
Ideally, your credit card balance will be within 30% of your limit. For example, if you have a credit card limit of $1,000, you will only carry a balance of $300 or less.
Even if you plan to pay off your balance when the bill comes, carrying over 30% of your credit limit can be risky to your score. Your credit card issuer will report your balance at the end of the period, so that number will go on your credit report.
Limit Your New Credit Applications
When you take on new credit, your credit score takes a hit. Too many inquiries will lower your credit score, so it’s essential you only apply for credit when you need it.
In addition, opening a new account will lower your average credit age. This could also impact your credit worthiness since there’s a shorter repayment history with new accounts.
Keep an Eye on Your Credit Report
Errors happen, and even if you’re doing everything right with your credit, there may be issues with your credit report. There’s also the risk of identity theft and credit card fraud that can drop your credit score.
You can check your credit score and report for free to see if there are any discrepancies. If you find an issue, you can report it and have it removed from your credit history (though the process to do so can be long and complicated).
Never Make a Late Payment
Your payment history is one of the heaviest influences on your credit score. If you pay late, your credit score is certain to take a hit.
It’s essential to pay your bills on time, every time. A late payment may stay on your credit report for as much as seven years, though its impact will lessen after two years.
Don’t Close Old Accounts
If you no longer use a credit card, it might be tempting to close an account. But ending credit accounts can be as damaging as opening new ones. Having a zero balance on old accounts can help your credit utilization ratio and average credit age. If you want to close an old account, be strategic about it to ensure a minimal impact on your credit score.
Let Clever Help You Explore Financing Options, Regardless of Credit
Are you trying to get a loan so you can invest in real estate? You’ll be glad to know that there’s a loan for everyone, regardless of credit score or history.
Working with a Clever Partner Agent gives you an advantage as an investor. Your agent can help you explore financing options that are best suited to your credit score and other factors so you can maximize your ROI. And, in addition, you can further increase your ROI when it comes time to sell since our Partner Agents work for a lower commission.
Connect with Clever today to find an experienced, top-rated agent in your local market that can help you navigate the complexities of financing investment properties!