Improving your credit history/Creating Credit history to get a home loan

Tips For Improving your Credit Score To Get a Home Loan

If are starting to look at homes, you already know how important it is to have good credit. However, if you are just starting out, you may not have any credit yet. Many others struggle with bad credit and they need to increase their credit scores if there is any chance at buying a nice home.

Bad credit and no credit are not the end for you, even if you are shopping for a home. There are ways to make your credit better.

Here are some tips for improving your credit score (even if you are just starting out).

Understand how your credit score works. Your credit score is made up of several factors. These include:

• Payment history. Thirty-five percent of your credit score is about how you can responsibly handle money. It makes sure that you are paying your bills on time. Bankruptcy is noted on this section.
• Credit utilization ratio. This ratio is used to determine how much credit that you have that you are actually using. This should be less than thirty percent.
• Length of credit history. Fifteen percent of your score depends on how long you have been paying your bills on time.
• New credits account. Ten percent of your credit score is determined by how many new accounts that you open on a regular basis. If you open up too many at once, it can show lenders that you borrow money frequently to purchase items. For this reason, it is better to open new accounts over time.
• Credit mix. Ten percent is determined by the types of loans you are taking out. Student loans, car loans, and mortgages are different than credit card debt.

 Some factors that impact your credit score:

• On-time payments
• Capacity used/available credit
• Length of credit history
• Types of credit used
• Past credit applications/inquiries

Know that a good credit score can make a difference
Credit Scores :-

• Excellent - Above 720
• Good - 680-720
• Fair -620-679
• Very Poor - Less than 580

If you don’t have any credit score, open a credit card or two and use them responsibly. One way to get credit is by opening a credit card or two. Use them every month and then pay the balances off at the end of the month. After a few months, you should really see a difference.

If you are unable to get a credit card, ask someone else if they can add you to theirs. Not only will it increase your credit score as they continue to use it responsibly, it will also help you with your credit utilization ratio. You don’t even have to use the card. You just need to be an authorized user and your score can really increase.

Pay off as much of your debt as you can. One of the fastest ways to bring your credit score up is by paying off some of your debt. You shouldn’t try to max out your credit cards. Instead, you should try to use less than thirty percent of your available credit to help with your credit utilization ratio.

If you are unable to do this (which might be why your balances are so high), you might want to look at a way of increasing your income for a little while until you can get your debt down. You may also want to decrease your spending so you are not relying on your credit cards as much.

Check your scores regularly and correct anything that is wrong. Credit companies make mistakes too so it is important to monitor your scores and look through the history to see if anything doesn’t add up. Fixing any mistakes can really increase your credit score.

Though it can feel daunting when you have bad credit or none at all, you can change your situation with just a few simple steps. It helps to know what makes up your credit score. Then, start getting a credit card or two and use them responsibly. If you can’t, become an authorized user and get the benefits of a credit card. If you have a lot of debt, work hard to decrease the amount that you owe. By paying some off, you are closer to getting your dream home!