While most home buyers understand that having a good credit score is important when financing the purchase of a new home, they may not be aware of the steps they can take to improve the little number that makes a big difference. If your credit score is low or your credit history is less than perfect, Keystone Homes offers these five steps that prospective home buyers can take to begin repairing their credit:
- Lower outstanding balances – Almost one-third of your credit score is based on the proportion of available credit you are currently using to your overall credit limit. Also factored into this number is the amount you owe on installment loans compared to the original loan amount. Make it your goal to keep your overall revolving balance under one-third of the available limit, although 10 percent is best.
- Pay bills on time – A whopping 35 percent of your credit score is based on your payment history for credit cards, installment loans, retail accounts and more. The best way to maintain your score or to improve it is to always pay your bills on time. Late payments and other delinquencies can remain on your report for several years, and collection accounts remain on your report for seven years, even if they’ve been closed out!
- Improve your credit mix – 10 percent of your credit score is based on the type of credit you maintain. Credit bureaus like to see that you can manage installment debt, such as a mortgage or auto loan, as well as revolving debt, which consists of credit cards or lines of credit. If you only have one type of credit, consider broadening your exposure.
- Keep old accounts alive – About 15 percent of your credit score is based on how long you’ve had a credit history. The three main credit bureaus, Experian, TransUnion and Equifax, consider the ages of your oldest and newest accounts, as well as the average age of your open credit accounts, when they calculate your credit score. Experts recommend keeping your long-established credit card or line of credit open. Make sure to use it at least once every few months to keep its status active.
- Apply for credit strategically – The last 10 percent of your credit score is based on how many recent credit accounts you’ve opened, as well as the number of times someone has requested your credit score. It’s important to avoid signing up for accounts that you don’t really need. While opening new accounts can improve your credit score over time if you handle them responsibly, opening too many new sources of credit in a short amount of time can damage your credit score.
You have the right to obtain a free copy of your credit report once every 12 months. To request a copy of your report, visit www.annualcreditreport.com.
Once you have strengthened your credit score and are ready to begin your search for a new home in Augusta, make sure to visit Keystone Homes’ many communities. With home prices beginning in the low $100,000s, Keystone Homes has a location, home plan and price point to match ever buyer’s needs. For more information, visit www.BuildKeystone.com.