So you want to buy a new home but your credit score stopping you? You have a stable job, a great income, a low debt-to-income ratio, but that pesky credit score number isn’t as high as you wish it was? Believe me, most of us have been there!
People with excellent credit scores have earned them for a reason. The borrow money and pay it back on time. There’s no trick to what they’ve done, and there is no one action that will help you get a great credit score. When someone asks me how to earn a good credit score, I tell them to look at the spending habits of those with great scores and to develop the same habits. Here are the SEVEN habits of people with high credit scores.
People with great credit scores want every purchase to count. An investment doesn’t count unless the three credit reporting bureaus know about it! They make sure they know about it by paying everything with credit cards.
Rather than deposit your paycheck and spend, think of your spending as a monetary cycle: Put your paycheck in the bank, spend with your credit cards, and pay off the cards with the funds you’ve already deposited. It’s the extra step that pays off big with the added security and boosts to your score that credit cards provide.
Credit cards aren’t just for large purchase. Using your credit cards for items like soft drinks and gum has become so common hat credit card companies have given a name to them: “Micro-purchases.”
Debit cards provide you absolutely nothing that a credit card won’t, and credit cards will build your credit score! Furthermore, if someone steals your credit card, you’re protected against fraudulent purchases, while with a debit card, it’s just more headache for you. Get on a mission and take every opportunity to build your credit going to the grocery ore, buying gas, or renting movies.
People with great credit scores don’t typically carry high credit card balances. The easiest way to emulate this is to make sure that you don’t carry ANY balances. You’ll obtain the best credit score if you make sure that you’re using the smallest portion of your potential limit- that means “zero”. People with great credit scores make sure to use their cards, but pay the balance off every month.
For the credit bureaus to reward your good spending habits, you’ll have to pay your bills on time. However, have a little leeway. While it’s not a good idea to pay your bills a ew days late because your creditors will charge you late penalties, it won’t affect your credit score negatively unless you pay them more than 30 days late. The easiest way to stay on top of your bills is to pick one day out of the month to take care of everything.
Since people with excellent credit scores habitually borrow money and immediately pay it off, the credit card companies are very comfortable consistently raising their spending limits. People with great credit scores consistently request higher limits because it allow them the freedom to borrow and keep a balance, if the need arises, without lowering their scores.
You will have the best credit score if you keep the balance of your cards roughly below 35% of the limit of your cards. Furthermore, if you have high ceilings, you can take advantage of the promotional offers that the banks offer from time to time.
The credit bureaus take into account the age of your credit lines and people with great credit scores know this, and exploit it. Many times, people with mediocre or low scores will pay off a card they’ve absed and close the account because they subconsciously think it was the card’s fault hey let the blanc get as high as it did (I have to admit, I did this before I knew any better). This is NOT the correct thing to do in this situation. That card has a great history behind it! You’ve shown the bureaus that you’re willing to borrow a large sum of money and then pay it down to zero. People with great credit scores NEVER close credit card accounts because they want to show that they have a long history of correctly using credit.
Your home is probably the largest purchase you will ever make in your life and is the one purchase that can make the most significant impact on your credit score. When you purchase a home, you’r showing the bureau that you can consistently budget yourself to pay a large portion of your income towards and amount on a monthly basis. There are some reasons people with great credit scores refuse to rent, and the impact of paying a mortgage on their scores is one of them. When a first-time home buyer finally closes on their home and pays the mortgage on time for a few months, they will see their credit score jump around 50 points and sometimes higher!
People with great credit scores haven’t achieved anything too difficult. They have adopted some fantastic spending habits. If you would like to earn a great credit score, borrow these habits and watch your score climb. Along with your score, your financial health should benefit as well!
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