Since we help people to find mortgages from banks and private lenders, we come into contact with a good amount of first time buyers at Benson Mortgages. Among many other topics, there seems to be confusion around credit history, how it works, and how to build a good score. However, we don’t believe that it should so difficult which is why we have compiled some tips down below.
Before we head into the more detailed tips, you have to realize that your credit history is affected by the decisions you make today. If you have made poor financial decisions in the past, you cannot affect this now but you can start today with some new positive habits!
Credit Card Balance
To start, we suggest looking at the difference between your revolving credit and the amount you actually use. When this percentage is above 30%, your credit score will see damage so you need to keep your balance low. Even if you pay in full each month, your credit score will still suffer if this percentage is high so work on reducing the balance.
Keep Old Debt
When it comes to credit scores, this is one of the biggest misconceptions of all. Whenever you pay off a car or even your home, you don’t have to pick up the phone and ask for it to be removed immediately. In fact, it actually looks good on your report because it is a ‘good’ debt and one that you handled well, paid as agreed, and kept up with arrangements. Essentially, removing old debt is like trying to remove good college grades from your resume so leave them there and focus on the bad debts instead.
Pay All Bills
If you’re looking into buying a car or home, it can be easy to lose your focus elsewhere and pay bills late but this is a terrible thing to do. If you want to build a good score, you need to pay all bills on time month after month because this shows reliability and that you’re good for your word. Whenever you drop the ball in this area, you will be questioned for bigger purchases or loans.
Don’t Take Risks
With a new home at stake, sometimes people think it is a good idea to start taking risks but your credit score just isn't the right arena for this. When it comes down to it, the banks and lenders will actually be looking for the opposite - a boring score where all payments are made in full and on time each month. Once again, it is all about reliability and banks need to see that you will be able to pay your mortgage when buying a home. If you can’t pay a small phone bill each month, there isn't necessarily going to be the trust there for a full mortgage.
Finally, we also recommend switching your focus slightly and not worrying about your credit score too much. Of course, this is easier said than done when there is a house on the line but, as long as you pay attention to the tips above, you shouldn't ever have a problem building your score. If you need help moving forward, we have experience and the necessary skills to help at Benson Mortgages so feel free to get in contact today!