In this new world of high interest rates and high home values as buyer's you need to gain an edge. Did you know if you applied for a loan with subpar credit your interest rate would be much higher than someone with good credit.
Facts: Before interest rates got to where they are now, in 2020 they were at all time lows. I was helping two sets of clients at the same time in 2020.
One had good credit, and ended up getting an interest rate under 3. The other had their credit in the 600's and got a rate just under 5. So if you are applying for a mortgage with subpar credit you can expect to pay a higher rate than the national average, which is hovering around 7.
So instead of paying a much higher rate, why not work on repairing your credit, before buying. Lets talk about a few ways you can up your credit score.
Your credit score is based on a number of factors including payment history, debt levels, and length of credit history. Good credit can get you approved for loans and credit cards with favorable terms.
So what can you do to improve your credit score?
Keep up with payments! Like I said earlier your payment history factors into your score. If you're not making payments your score will be negatively effected.
This is actually the most important factor, so if you are behind in payments get things right. Make sure to pay everything on time. If you have back payments, work with the creditor to get you back on track.
Payoff credit card debt: Again debt levels are factors in your credit. Credit card debt can negatively effect your score. If you have mountains of debt, use a consolidation loan or credit service to help pay your debt off faster.
Check/Fix your credit reports: If you have a credit check done, you'll see what needs to be fixed. The first step in fixing a problem is knowing what is wrong.
You can get a free copy of your credit report from the 3 major credit bureaus Experian, Equifax or TransUnion. Review the report, there may be so inaccuracies.
If you find any, be sure to report them. Something as simple as that can improve your credit. The sooner you fix mistakes on their end, the better it is for you.
Finally don't open any new accounts: This also can be good advice for once you are in the process of getting a mortgage. Any large changes in your finances can negatively effect you while you are trying to obtain a loan.
Applying for new credit can lower your score by creating hard inquiries and lowering your accounts average age. So only do it if you absolutely need to.
Improving your credit score takes time and effort, but it is worth it in the long run. By following these steps you can potentially save hundreds of dollars a month on payments.
Also here in Connecticut, the state has a number of programs to help with credit repair. Contact me, and I can get you to the right people that can help you improve your credit.
