You’re about to buy your dream home. You’ve stacked up a bit of money in your savings account. You’ve held a steady job with good income. It’s time to get approved for a mortgage. Then, just as things finally seem to be falling into place, your mortgage lender can’t approve your home loan. Your credit score is too poor. It happens. We understand. Here at MortgageBase, we strive to provide our jumbo and super jumbo loan products to all applicants, but there are certainly constraints in the jumbo home loan market – credit score being one of them. That’s why we’re taking a moment today to talk about good habits that you can employ to ensure that you have good credit; that puts you one step closer to earning the home that you desire.
Pay Your Bills
It’s a bit of a no-brainer, but paying your bills consistently can build up your credit. Whether it’s your rent, your utilities, your car payment, or another bill, consistent, recorded payments improve your credit. On the flip side, if you miss a payment, pay less than usual, or are delinquent on an account, your credit score will drop. If your name is in the hands of a debt collector, your credit score may be dropping rapidly.
Get a Credit Card
Your credit score is also based on credit accounts. Open a credit card account or two, and utilize your card for various expenses throughout your day to day. Attaining, utilizing, and paying off your credit card speaks to your reliability as a borrower. Ultimately, that will build your credit score.
Pay Off Your Balance
Now, it’s crucial that you pay off your credit card balance at the end of each billing cycle. If you don’t pay the sum total of outstanding charges on your account, it’ll mar your credit score. It’s best to pay the full balance month after month. That said, it’s not a major strike against your credit score if you don’t pay off the full balance of your account. As long as you’re paying the minimum amount due on a given account, your credit score will remain relatively stagnant. If, however, your credit is maxed out on an account, and you’re failing to pay the minimum due balance, your credit will take a dive. Again, it’s best to pay off the full balance of any credit cards that you utilize.
Keep Credit Counts Rolling
While it may seem intuitive to close credit accounts if you aren’t utilizing them, it’s actually beneficial to keep these accounts alive. Credit score assessors analyze the duration of a credit account, among other variables. If you have credit accounts that are constantly opening and closing, it appears unreliable to a credit assessor. On the other hand, if you have a credit account that is stable, it further establishes your reliability as a borrower. So, unless you’re paying fees to hold an account open, it’s best to leave credit accounts active.
Don’t Get Credit Crazy
Now, you don’t want to get new credit accounts often. It appears risky when a borrower is opening new credit accounts one after another. Lenders shy away from borrowers who are actively seeking multiple sources of credit. Instead, lenders prefer borrowers who have a consistent record of borrowing. Sure, a borrower may pick up an extra credit card here or there; they might apply for a personal loan once in a decade – but a borrower that’s applying for four or five cards and a handful of personal loans? That’s a red flag. Stay consistent. Refrain from opening several credit accounts in a short period of time.
OK, this last one is an overarching sentiment: Credit assessors seek out borrowers who are consistent. Think about it. Lenders seek borrowers who are reliable. They pay their bills. They don’t default on loans. Borrowers who remain consistent are borrowers that lenders trust. Thus, credit assessors, like FICO, value borrower actions that are consistent. Strive to consistently pay bills and keep accounts open as we’ve mentioned. Keep major credit inquiries and requests to a minimum. Apply for a loan, credit card, or mortgage once per year or less – if at all possible.
When you make good credit a good habit, you’re on the right path to unlock financial flexibility and purchase your dream home. That’s a focus we can get behind here at MortgageBase. Learn more about our jumbo and super jumbo mortgage loans.