Why credit is important when buying your home

June 11, 2019
Why credit is important when buying your home

There are several important factors you should take into consideration before buying a property. They include: your budget, the property’s location and the use you will assign to it, the down payment amount and your financing options.

How you manage your credit can make a difference when it comes to getting your loan approved and the interest rate you’re given on your mortgage. Here are some tips that will help you maintain, improve or build up your credit score.

6 tips to boost your credit

  1. Know your credit. There are apps and websites that give you free access to your credit report. Sign up and access them regularly to learn how your shopping habits impact your credit. In addition, checking your credit on a regular basis will allow you to detect if someone has stolen your identity and is using your cards to make purchases without your authorization.
  2. Pay your debt on time. Creditors must receive payments no later than on each bill’s due date. You can schedule automatic payments or make online payments instantly. Take into account that if you send your payment via regular mail, it could take several days for it to be recorded—which could have a negative impact on your credit or impose late fees. Paying on time is one of the most important factors in determining your credit score.
  3. Don’t use all the credit available. Credit reporting agencies pay very close attention to how much of your credit cards’ available balance you actually use. Your credit score will suffer if your cards are “maxed out”. As a rule, using 30% or less of your line of credit is advisable.
  4. Avoid applying for credit constantly. Each time you apply for a card, a loan or an increase in a line of credit, companies will make a hard inquiry to find out your credit score and decide if you are eligible. Multiple inquiries could be interpreted as if you’re currently experiencing financial difficulties or have cash flow issues—and will hurt your credit. Also, use caution when offered discounts on purchases if you apply for a new card. Acquiring new debt in a short period of time will have a negative impact on your score.
  5. Make a payment that is more than the minimum required. This way you control your credit usage and reduce financing charges.
  6. Consider a secured credit card or loan. If you don’t have credit or have had problems before, apply for a secured credit card or loan guaranteed by a sum of money as collateral. That way you can get the benefit of a line to build up or repair your credit. You will see how your score improves as you borrow money and pay on time.

If you want guidance on buying or refinancing your home, contact one of our mortgage consultants at 787-707-7070 or visit www.popular.com/en/mortgages.