It’s exciting to think about buying a new home. Unless you plan on making a cash purchase, your home-purchase process will include a mortgage loan. There are numerous benefits to obtaining loan approval before making an offer on a house. Keep in mind, however, that it’s highly unlikely that a South Carolina lender will approve your application if you have a terrible credit score.
Having said that, if your current credit score is lower than you’d like it to be, try not to worry. You’re not alone in your struggle, and there are several things you can do to boost your score. It’s advisable to get your score as high as you can before requesting a mortgage loan. While pre-approval isn’t required to make an offer on a home, it’s to your benefit, especially if you are bidding on a house where there are multiple other offers on the table.
Try to increase your limit to boost your credit score
It might sound counter-productive to suggest increasing your credit limit to improve your credit score. Here’s the key: If you maintain the same (or, better yet, a lower) balance but increase your credit limit, it almost instantly causes your score to improve. If you go this route, ask your credit card company if you can obtain the higher limit without doing a “hard” inquiry, which could cause you to drop a few points before your score goes up.
Implement a new form of credit and make timely payments
You might think it’s a good thing to not have any loans out or to only have a loan but no credit cards. In fact, this can hurt, rather than help, your credit score. It’s an easy fix: If you have only one (or zero) credit cards, obtain one or two more. Also, if you only have credit cards, try to take out a small personal loan. The reason? Having different types of credit and making timely payments on all is a great way to improve your credit score.
Never use more than 30% of your credit limit
You’ve probably heard a friend or family member say that they have “maxxed out” a credit card. Perhaps you’ve even done so yourself. Using more than 30% of your available credit can cause your credit score to take a dive. The less percentage of the limit you use, the better. A worthwhile goal to set is to use less than 7% of your available credit. This will prompt a significant increase in your credit score.
Just think—at this time, next year, there’s a good chance you’ll be making new memories and enjoying life in your new South Carolina home! A lot must happen between now and then to achieve your goal. By improving your credit score and obtaining loan-approval ahead of time, you’ll be one step ahead of the game. And, don’t forget to ask an experienced real estate agent for ideas on how you can get the best return on your investment when the time comes to make an offer on your dream house!