Here’s How To Improve Your Credit Score And Get A Low Rate Mortgage

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People wait to visit a home for sale in Garden City, Nassau County, NY on September 6, 2020.

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Mortgage interest rates are close to historic lows. However, if you want to take advantage of these rates, check your credit score first.

This three-digit number determines if you can get a mortgage, the type of loan you will receive, how much interest you will pay, and possibly how much money you will need to make a down payment. In that hot housing marketaccording to experts, this can affect your success.

The base 30 year fixed rate mortgage is currently 3.090%. Bank rate

“You are fixing this rate for potentially 30 years, so you are saving an incredible amount of interest,” said certified financial planner Faron Dougs, founder and CEO of Harrison Wallace Financial Group in Libertyville, Illinois.

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Credit ratings range from 300 to 850. Good is from 670 to 739, very good is from 740 to 799, and 800 and above are considered excellent. according to FICO, a leading credit scoring company.

Homebuyers who took out mortgages in the fourth quarter of 2020 received an average score of 786, according to the agency. Federal Reserve Bank of New York

If you are not eligible, it does not necessarily mean that you are excluded from the market. You can take multiple moves to improve your score.

Check your credit history

You are allowed one free credit report year from three major credit rating companies: Experian, Equifax and TransUnion. You can contact each one directly or access them via Annualcreditreport.com

You should not only know your account, but also make sure that there are no errors or unintentional skeletons in your closet, such as a missed payment that you forgot about.

Getting a report before applying for a mortgage or pre-approval, ideally a few months in advance, will give you time to fix any issues.

Reduce your loan utilization rate

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Lenders will keep an eye on whether you have high credit card balances.

“Even if you pay your credit card bills in full each month, you can still have a high utilization rate,” said Ted Rossman, senior industry analyst at Bankrate and CreditCards.com.

For example, if you shop for $ 3,000 and have a $ 5,000 limit, you are using 60% of the available credit. Try to keep it below 30%, Rossman says. Those with the best credit score keep it below 10%.

Making an extra charge in the middle of a billing cycle can help lower your balance before the statement is published.

Pay bills on time

Late or missed payments can lower your bill.

The easiest way to avoid this is to set up automatic bill payments, Dougs said.

Get a loan construction loan

Some public banks and credit unions offer construction loanswhich are designed to help the owner obtain a loan when making payments.

You will pay interest, although some lenders may reimburse the costs after the loan is paid.

Become an authorized user of someone else’s credit card

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“If you don’t have a loan, one of the best ways to start building it up is to become an authorized user of someone else’s card,” Dougs said.

“Make sure you do this with someone in good standing,” he warned.

Keeping your account in good standing will have a positive impact on your credit history.

Alternative credit scoring doesn’t matter

You can increase your credit with alternative solutions that account for bills that are not normally included in your credit report. However, they may not work for government-backed mortgages.

Experian Boost you can raise your Experian account by counting your phone, utility and streaming bills, while eCredable Elevator informs TransUnion about utility bills and phone bills. Perch allows you to increase your rankings through recurring expenses such as subscription services and rentals.

The platforms use a newer version of the FICO algorithm, according to Rossman. Government-backed mortgage companies Fannie Mae and Freddie Mac are asking for older versions, so they won’t see any improvement in results.

Don’t rock the boat

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