How To Build Credit To Buy A Home

Most real estate purchases are made possible with mortgages. When you apply for a mortgage (or any financial aid, loan, or borrowing off of personal credit), they must first review your credit score before deciding to help you buy a house.

Banks sometimes approve mortgages for people with low credit scores. However, you have a much better chance of getting approved for a mortgage at a good rate if you have a good credit score.

What is credit, and why do you need it?

If you are still confused about what credit means, then you should first hold off your plans of getting mortgages. Credit scores are financial indicators that help banks and lenders decide whether to grant you a mortgage.

Credit scores are also somewhat similar to levels in a game.  In a game’s “leveling” system, players can access certain content that is not available for players with different levels. Banks grant loans that can have different amounts, payment structures, and durations to people depending on their credit scores.

Sadly, banks do not just hand out mortgages to everyone who is in need. Every individual has to submit a credit report and their mortgage application. If you have a bad credit score, then your mortgage application will likely be denied by banks.

The Importance of Good Credit Scores

Almost all banks immediately approve mortgages of people after seeing their good credit scores. Also, having a good credit score can expedite the whole process for you when you are applying for a mortgage. Aside from that, it may lessen the interest that you have to pay throughout the loan.

A good credit score is a “pass” for getting approved quickly on mortgage applications. This gives them assurance that you will pay on time and complete your payment as agreed upon.

Are you worried that you might not get a mortgage because of your not-so-good credit score? Follow these few steps to increase your credit score, get the mortgage, and own the house you want!

Consider these steps to improve your Credit Score

How can you get a good credit score?

Try following these steps:

Check your Credit Report

Review your credit status before reporting it to banks as part of your mortgage application. The Federal Trade Commission (FTC) released a report indicating that about one in five Americans had discrepancies in their credit status.

You can get an authentic copy of your credit report only from federally authorized websites. Check for errors in information such as duplicate records, account status, and recent transactions. If you find any errors on your credit report, raise a dispute immediately.

Seek help immediately from Federal agencies if you will raise a dispute regarding your credit reports. Make sure to follow their processes and guidelines to resolve conflicts successfully.

Settle some of your debt

Once you have reviewed everything and no errors have been found, you need to take the next step. Debts are crucial when applying for mortgages, and you should reduce it as much as possible. The debt-to-income ratio presents to banks how you will manage to pay monthly dues during the duration of your loan.

Make a priority list for your debts so that you can manage your finances more efficiently. If you have the financial capability, then start paying off the largest debt that you hold immediately. But if your financials are not that good, you can always slice up your debts and pay them off gradually.

Debts must not be left unchecked because not only will they impact your credit score, but they may also affect you personally. Indeed, you do not want to be chased off by people ushering you to pay off your debts, right?

Apply for an increase in your credit limit.

If you cannot pay off some of your debts, then you can go the other way. You can ask for a credit limit increase from your credit agency. Having an increased credit limit does not reduce your debts so you still have to pay them eventually.

Having an increased credit limit helps improve your credit score, increasing the chance of banks approving your mortgage application. However, you must keep in mind that credit companies conduct a credit check before granting an increase. Avoid doing more harm than good by assessing your credit status first before applying for an increase.

Submit a Rescoring Request

If applying for a credit limit increase does not work, you can ask credit agencies to rescore your credit status. Approval is required before your credit report can be updated. This gives you a better chance of getting that mortgage and saves you the effort to clean your credit status.

You may have to be patient before you get your credit report updated. Credit agencies also run a credit check before rescoring anyone’s status, which can take weeks or years.

Use someone else’s credit status

Not a fan of long processes? You can use other people’s money or credit. You can have your name registered as an authorized user of your friend or relative’s credit card. Once you are an authorized user, your information is shared with other owners and theirs to you.

It is important that you become an authorized user to an account that has no negative records. Being added to an old account with clean records is much better. This helps your credit go higher and saves you time from increasing your credit score by yourself.

Be persistent

As the famous saying goes, “Try, and try until you succeed.” You have to convince banks to give you a chance by showing them that your credit score can be improved. Exhaust all available options to improve your credit score; you will benefit from it.

Do you want to own a house but need a mortgage to do so? Then, present a good credit report to banks or other financial institutions that can help you. Do you have a credit score that is below average? Then do these few steps to raise up your credit scores and increase your chances of getting a loan!