Most of us have financial goals in mind. For most people, this includes The American Dream of home ownership. Unfortunately, this goal can oftentimes seem unachievable to many Americans. Of course, whether it is the goal of a home purchase or even a car purchase, your credit score can make all the difference in the world. For example, having a score of 700 versus 650 could mean getting approved for a new car loan at 4.9% interest instead of 7.25% interest. Now just imagine the difference in your payment when considering an even larger purchase, such as a home. Below we discuss a few simple steps to build your credit and potentially realize the dream of home ownership by the end of the year!
Tips to build your credit
- Consolidate/pay off your debt: Large balances or missed payments can be particularly detrimental to your credit. For starters, if you have multiple debts, you will want to analyze your various balances and their respective interest rates. If possible, you would want to begin by consolidating your balances to the lowest possible interest rate. Furthermore, you may want to pay above the minimums on your most recently opened accounts first. The reason for this is because FICO and VantageScore scoring companies give more weight to activities on new and recently used accounts.
- Avoid opening too many credit cards or lines of credit: Applying for new credit lines often during a short period of time can negatively impact your credit score. It is important to remember that each hard inquiry on your credit may cause your score to drop several points.
- Raise your credit limit: By having your credit limit increased you will be able to lower your utilization so long as your spending does not increase. As a point of reference, most experts recommend keeping your utilization under 30% of your limit.
- Make timely rent and utility payments: A new feature such as Experian Boost, from Experian, gives you the option to report rent, utility and streaming service payments made from your connected bank accounts.
- Monitor and inspect your credit reports: It is extremely important to consistently monitor your credit reports to ensure that your information is accurate and up-to-date. For example, if a late payment is accidentally reflected on your credit report, this could drag down your credit score. Checking your credit report should be a routine habit if you are attempting to save for a home. AnnualCreditReport.com offers free weekly reports through the end of 2023.
The dream of home ownership is not as out of reach as many may believe. Of course, it will take a disciplined approach towards debt consolidation, debt elimination, and saving to accomplish this goal. In addition to the tips shared in this article, it is a best practice to work with a local and knowledgeable real estate agent to analyze your local market and determine a plan. Although mortgage interest rates have risen rapidly over the past year, the dream of home ownership is certainly achievable. Of course, the silver lining of higher mortgage interest rates for many home buyers in the current market is less competition from other buyers. This has resulted in properties remaining on the market for longer periods of time leading to more negotiable sale prices.
Are you looking to buy a property in South Florida? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, be sure to download the free Florida Home Search app for your mobile device.