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One thing I hear a lot as a real estate agent is, “I can’t buy a home because my credit is too low.” Heating this is unfortunate because while it may be a little more difficult, it is not impossible. Here are some simple steps to take if you are serious about purchasing a home, but you are worried about credit.
TALK TO A LENDER:
You will be required to work with a lender, unless you plan to pay cash for a home. A lender will take a deep dive into your finances. While this can be uncomfortable, you have to remember it is their job! They are not there to judge you, but rather a resource to advise you on potential options based on your circumstances. A good lender will be able to point out areas of improvement and give you a list of steps to get you on the right path. This will be the most helpful first step you can take!
eKEEP YOUR CREDIT LIMIT LOW:
When given a credit card, there is a limit that you cannot (or should not) exceed. It is recommended to stay below 30% of that limit. For example, if you have a credit limit of $10,000 you should not spend more than $3,000 in a month.
CHECK CREDIT REPORTS:
There are tons of free resources out there that allow you to check your credit without a “hard inquiry”. A hard inquiry will affect your credit score. Sites such as Equifax or Credit Karma allow you to check your credit as often as you want to, for free. Check a full annual report as well in order to check for possible errors.
DON’T CLOSE UNUSED CARDS:
If you have a credit card that is no longer being used, keep it open! Try to hide it in a safe place, destroy it, or if you have the willpower keep it in your wallet and don’t use it. Having a few lines of credit can actually be beneficial to your score.
PAY BILLS ON TIME AND IN FULL:
While it may not always be possible, you should be doing your best to make it a priority. Just one late payment can negatively impact your credit score. Be sure to pay off as much as you can as quickly as you can.
While all of these may seem like simple steps, repairing your credit may take some time, patience and persistence. But it is possible! There are plenty of programs out there to help you get your credit in good standings.
