Fix That Credit

Fix That Credit

As we move in to the fall in Denver, the housing market is still very strongly in favor of sellers.  If you are looking to purchase a home, this means that you have to be an aggressive, ready, and willing buyer to be able to purchase.  Part of that process is to make sure that your credit is in good shape.  Typically, most lenders are looking for a credit score of at least 640 to be able to qualify a buyer for an FHA loan.  Some lenders offer different products that can qualify buyers under 640, but remember that with credit scores, the higher the better.   So how do you continue to build/improve/repair your score?  

1.     The easiest way to improve a credit score is with credit cards.  While credit cards are convenient, it is important to make sure that you consistently are paying off your cards.  Opening a credit card, especially a secured card, and paying them off on time, will be the fastest way to increase your score.

2.     Current Debt- instead of transferring debt to a different card or account, paying off the debt before opening a new line of credit is crucial.  Plan ahead by scheduling calendar reminders in advance of when payments are due, that way you don’t get behind on payment and also never forget.

3.  When managing current lines of current don’t open additional lines of credit too rapidly as this can ding your credit score.  Typically wait a few months before opening lines of credit.

4. Your Debt to Income or Credit Utilization Ratio- Keep this under 20%.  So for example if you were to have a credit limit of $5,000, make that your debt is not more than $1,000.  These numbers are not something to stress over, understanding what they need to be and keeping them in mind will allow you to have a higher credit score.

5.  How to pay of your debt.  Believe it or not, but all debt is not the same.  It is smart to avalanche your debt payments.  This means to make sure that you are paying off the debt with the highest interest rate first.  Once that is paid off, move to the next highest interest rate.  The faster you can eliminate the higher interest rates, the higher your credit score will be, and even better the more money you will keep in your pocket.

When you are looking to purchase a home, or making a larger purchase in general, keep your credit score in mind.  The more work you do to keep a higher credit score now, the more money you can save over the long term.

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Michael Kane is a Broker Associate at Keller Williams. He is a member of the Carr Peck & Associates team that is recognized locally and nationally as in expert in real estate. Locally he is a member of the Denver Metro Association of Realtors.  Nothing brings him more joy than making his client’s dreams become a reality!  For more information feel free to contact him or call 303-717-9284.  

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Phone: 720-446-6301
Dated: September 15th 2014
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