Credit Score Information and Strategies for Improvement
Your credit score measures your financial health. When applying for any loan, especially a mortgage, your credit score is reviewed, and a determination is made. A score of 620 or higher is the current industry standard for a conventional mortgage. If you want to know how credit scores work and how to improve your own, here are a few strategies.
How Credit Scores Work
It seems strange that our financial lives can be reduced to three numbers, but that’s the idea behind credit scores. It’s a number between 300 and 850 that represents the creditworthiness of consumers. For borrowers, the higher the score, the better.
The number stands for the consumer’s credit history, including open accounts, debt levels, repayment history, and more.
What Mortgage Lenders Want to See
Since mortgage lenders look at this score to determine if a borrower is in good standing for a loan, they want to see a few things. You don’t necessarily need flawless credit, but lenders want to see a higher number. The FICO score is the most commonly used by lenders, and a score of 620 is necessary for a conventional loan. Some other loans, such as an FHA, will consider lower numbers.
Strategies for Paying off Debt and Improving Scores
So now that you know what credit scores represent, how can you make improvements to qualify for a loan and buy a home? Here are a few tips that can get you started.
Review Bill Payments
Start by knowing where your money is going. Create a list or a spreadsheet of all your bill payments. The list should include your car, utilities, credit cards, student loans, health insurance, and whatever else you pay for every month.
Reduce Reliance on Credit
If you tend to pay for most things with credit, you will want to think about ways to reduce your reliance on your cards. Create a budget and use cash as much as possible. To keep you from reaching for your card when buying, keep it in a place where you can’t access it, such as a safe. Even if you stop using the card, don’t cancel it. Maintaining open accounts will help improve your credit score.
Pay Off Debt
Next, make a plan to pay off your debt. Start by listing your debts and rank them either by importance or the most significant amount. Focus on one debt at a time and when it’s paid off, move to the next. Once your debt is paid, start a savings account to help you build a reserve.
To find out more, contact GoPrime Mortgage in West Asheville to get preapproved for a home loan.
GoPrime is not a credit repair consultant and does not offer credit repair. Please consult a licensed credit repair consultant.
