How to Increase Your Credit Score to Qualify for Home Mortgage

 In Blogs, Home Buying Tips

SAN DIEGO, CA. – So you want to buy a home in San Diego but you know that your credit score can be described as less than “ideal” and you know that you’re going to have to increase your credit score in order to qualify for a mortgage loan with a low interest rate.

In this article I will share with you several tips you can use to increase your credit score and qualify for a low mortgage interest rate so you can buy the San Diego home of your dreams.

Step #1 – Buy Your 3-In-1 Credit Report

Before you can take steps to improve your credit score you should purchase a copy of your 3-in-1 credit report at least 90 days before you apply for a mortgage loan because it can take Equifax, Transunion and Experian at least 30 days or longer to respond to you in writing if you dispute or ask them to remove items from your credit reports.

Step 2 – Pay down Your Debts

If you have multiple credit cards, student loans or auto loans you should pay down, or pay off your debts (if possible) because this will help to lower your debt-to-income ratio since most lenders want to see a debt-to-income ratio of no more than 33 percent.

Example: Let’s say that your monthly mortgage payment is $1,500 per month, your car payment is $100 per month, and you’re paying $400 per month for your other debt payments, this would make your total monthly debt $2,000, and if your total income every month is $6,000 then this would make your debt to income ratio 33 percent.

Step 3 – Don’t Close Credit Accounts

Although you may be paying off some debts as you are lowering your debt-to-income ratio the reality is that you should not close any credit accounts because closing a credit account can actually lower your credit score even more than keeping those credit accounts open.

Step 4 – Always Pay Your Bills on Time

One of the most important things you can do while you’re working hard to increase your credit score is to pay your bills on time because on time bill payments, collections and delinquent accounts will have an effect on any credit score and make it more difficult for you to buy a San Diego home for sale.

Step 5 – Catch Up Any Past Due Balances

During the process of reviewing your credit reports if you spot any bills or debts that you may have forgotten about, and they are currently past due, you should pay off those bills immediately because one past due bill, especially if it’s an overdue utility bill, can lower your credit score and stay on your credit report for up to 7 years.

Step 6 – Keep Your Balances Low

Another important thing that you can do to raise your credit score before applying for a mortgage loan is to keep your balances low on all of your credit accounts, to at least 30 percent of the credit limits on each account because creditors want to see that credit accounts are being used responsibly.

Step 7 – Don’t Make Major Lifestyle Changes Yet

Last of all, but most important if you plan on making major lifestyle changes like changing jobs or making major purchases like buying a boat, RV or new car, you should put off these major changes until after you’ve purchased a San Diego home because making any of these lifestyle choices now can affect your credit score and ultimately make it more difficult for you to qualify for a mortgage loan.

Learn More about Improving Your Credit Score

To learn more about renting vs. buying San Diego Real Estate contact Farrah Thomas with Farrah Thomas Real Estate by calling me at (800) 659-8469 x85.

Leave a Comment

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.

Start typing and press Enter to search