The journey to homeownership often begins with the health of your credit score. Whether you’re looking to buy your first home or repair your credit for a better mortgage deal, a solid credit foundation is key.
While building a strong credit score is not an overnight process, there are a number of tried-and-true recommendations for making sure you establish a consistent financial framework that allows you to develop a credit score that can lead to home ownership.
Always remember, your current credit score is a temporary state. By developing a plan and working on it consistently, you can make positive changes that will raise your credit score and put you in the best position to be ready to buy a home.
The resources below are a good place to start. But if you would like additional assistance, please contact your GRB Mortgage Originator.
General Credit Building Guidelines
Here’s a general guide to building or repairing your credit score on the path to purchasing your dream house.
Know Your Current Score
Start by obtaining a copy of your credit report from the major credit bureaus – Equifax, Experian, and TransUnion. Understand your current credit score and review the details of your report for any inaccuracies. Dispute any errors to ensure your score reflects an accurate representation of your financial history.
Create a Budget
Building or repairing credit often involves responsible financial management. Develop a realistic budget that outlines your income, expenses, and debts. Prioritize paying bills on time to establish a positive payment history, which significantly impacts your credit score.
Reduce Credit Card Balances
High credit card balances relative to your credit limit can negatively impact your credit score. Aim to reduce credit card balances and maintain a credit utilization ratio below 30%. This shows lenders that you can responsibly manage your available credit.
Establish a Mix of Credit
A diverse credit mix, including credit cards, installment loans, and retail accounts, can positively impact your credit score. However, avoid opening multiple accounts in a short period, as this can be viewed as a red flag. Gradually diversify your credit portfolio over time.
Settle Outstanding Debts
If you have outstanding debts, work on settling them to improve your credit score. Negotiate with creditors and explore debt repayment plans to show your commitment to resolving financial obligations.
Consider a Secured Credit Card
If your credit history is limited or you’re working on repairing credit, a secured credit card can be a valuable tool. Secured cards require a security deposit but can help you build a positive credit history with responsible use.
Monitor Your Credit Regularly
Regularly monitor your credit report for any changes or discrepancies. Many credit monitoring services provide real-time alerts, allowing you to address issues promptly.
You Can Do This!
Be Patient and Persistent
Building or repairing credit takes time, so be patient and persistent in your efforts. Consistent, responsible financial habits will contribute to a healthier credit score over time.
By taking proactive steps, you’ll be well on your way to building or repairing your credit score and paving the way for a smoother homebuying process. Remember, achieving your dream of homeownership is not only about the destination but also the journey toward financial wellness.
Additional Resources
There are many free resources available to help build and repair credit, including not-for-profit and government agencies. A few good ones to start with include:
AnnualCreditReport.com
If you aren’t sure what your credit score is currently, you can get a free annual credit report from each of the three credit bureaus – Equifax, Experian, and TransUnion. But always be careful. Type the URL directly into your browser to make sure you are going to the correct site. Many companies claim to offer a free report, only to end up charging you a monthly fee for ongoing credit auditing that you don’t want or need.
Consumer Credit Counseling of Rochester
Founded in 1970, Consumer Credit Counseling Service (CCCS) Of Rochester, is a community-based, non-profit organization, serving families in the Rochester, N.Y. region. Our vision is to focus on the financial wellness of families and individuals by providing them with certified professionals for confidential counseling, educational services, and other solutions enabling our clients to meet their financial goals. CCCS has been working with Rochester families for 50 years.
RethinkingDebt (Syracuse, N.Y.)
A regional not-for-profit affiliate that shares its roots with Consumer Credit Counseling of Rochester, RethinkingDebt is committed to helping individuals and families successfully deal with their financial difficulties.
ConsumerFinance.gov
The federal government’s Consumer Finance Protection Bureau provides consumers with definitions and information on common credit terms. Pay special attention to the items that explain how to avoid penalty rates and fees. You’ll also want to understand the finer points associated with common credit terms like introductory APRs and balance transfer offers. You can also check out their database of complaints for specific credit card companies so you can choose a provider wisely.
Consumer.gov
The Federal Trade Commission provides an online fillable PDF budget worksheet that can be helpful in understanding your household cash flow. Looking for ways to save a little extra money each month can add up quickly and bring you one step closer to purchasing a home.
Experian
That’s right, the credit companies themselves provide resources to guide consumers as the build and repair their credit. Experian has a whole series of articles to guide you down the right path. Topics range from setting appropriate expectations for changes to your credit score to how regular bills (think utilities and cell phone charges) can actually help you build credit.
American Consumer Credit Counseling
This not-for-profit organization helps consumers get out of debt. Founded in 1991, ACCC is a (501) (c)(3) organization, offering confidential consumer credit counseling services, debt consolidation, debt management, budget counseling, bankruptcy counseling, housing counseling, student loan counseling and financial education to consumers nationwide. Their counselors help people regain control of their finances and plan for a debt-free future. It’s hard work, but ACCC can help those in serious debt put together a plan that actually works.
OptOutPrescreen.com
Take advantage of the Fair and Accurate Credit Transaction Act and put a stop to unsolicited credit card mail. Visit the website or call 1-888-5OPTOUT to remove your name from prescreened mailing lists. You will need to provide your name, address, Social Security number, and date of birth in order to confirm your identity.