Planning to buy a home? Keep working on your credit rating. Here's some tips from the lesson I've taken from continuing education classes.....

 

Getting Finances in Order: Credit Scores (cont.)

One of the most important things your buyer can do is consistently pay at least their minimum payments before the due date for at least 2 years. If your buyer had a rough patch a year and a half ago that resulted in some overdue payments, they can simply wait six more months for those late payments to fall off their credit report and resulting credit score.

Has your buyer maxed out a credit card? Did they go over their limit? Do they owe more than 30% of their overall credit limit? If it is at all possible for your buyer to pay down their balances so the average debt is less than 30% of their credit limit, they can quickly increase their credit score.

Your buyer should also look at the age of their credit accounts. Did they recently open a department store credit card to save 20% off their first purchase? Pay off that balance and close that account. If buyers can keep older accounts open and close newer accounts (anything less than 5 years old), doing so will have a moderate impact on their credit score.

Finally, buyers should try to avoid hard credit checks. A “hard” credit check happens when a buyer applies for a loan or certain credit card accounts. Tell your buyer to avoid opening new lines of credit and shopping around for a mortgage. Each time they apply for a mortgage loan, their credit report is pulled, and their credit score goes down a little. Credit checks have the smallest impact on a credit score, but they can make a difference on your buyer’s mortgage rate.