Buying a home is one of the best investments a person can make. However, buyers need to be aware that only the best credit will secure a mortgage with a good interest rate and superb terms. If you’re thinking of buying an Irvine home for sale in the near future, here are five bad credit habits to break immediately.
1. Not Understanding Credit Scoring
Many first time homebuyers don’t really know how the credit scoring systems work. Buyers need to educate themselves on what affects their credit. The first step in fixing or improving credit is understanding how your score is determined.
2. Skipping Over the Entire Picture
So many buyers look at one aspect of their report and forget others. Be sure to watch credit inquiries, collections, and payment history, not just your credit score. This will ensure you present an attractive, well-rounded report to the loan officer.
3. Co-Signing for a Loan
When co-signing for a loan, it affects your credit too, not just the primary borrower. This loan will show up on your report too. It can also make you appear less creditworthy to potential lenders, as it messes with your debt-to-income ratio.
4. Making New Purchases
Avoid using credit for big purchases up to a year before buying a home (unless you pay it right off). Adding anything to the credit report can put a person in a different interest rate bracket for a mortgage. Remember, credit card utilization should be no more than 33 percent of the total credit limit, and credit needs to be opened for about three years to establish history.
5. Not Reading the Fine Print on Loans or Credit Cards
Many people have problems with credit cards and such because they do not read the fine print. Make sure to thoroughly read any contract before signing, even for a credit card.
Take time and prepare for your new home purchase in advance. Those who plan will thank themselves later for wise credit decisions that pay off in the end. When you’re ready to go house shopping, give us a call at (714) 454-6304. We’ll help you establish a feasible budget, refine your must-have list, and find an Irvine house for sale that you can call home!