If you’ve been putting off entering the housing market, now is the perfect time to jump in, if you’re financially ready. The market is beginning to rebound, and as a result, there are more houses for sale than in the last few years. Even better, the interest rates are still amazingly low, especially if you have excellent credit.
However, before you go to a bank for home loan pre-approval, make sure to take steps to improve your credit score first. The stronger your credit score, the lower your interest rate will likely be and the less you’ll pay in interest overall.
Order your credit report
You can get your credit report for free from any of the 3 big credit bureaus once a year. Just go to annualcreditreport.com to order yours. If you want to keep tabs on your credit report and score (ordering the score does have a fee), you can order from one credit bureau like TransUnion in January, for instance, then from Equifax in May, and Experian in September. Repeat the cycle in January with TransUnion. Then, for free, you’re able to check on your credit report quarterly.
Fix any errors
The sad truth is that most credit reports have errors. Go through yours carefully and note an errors. (Mine had a student loan on there that I had paid off 7 years ago!) Fixing errors generally requires that you send a letter to both the credit bureau and the business from which the credit was issued and include proof that you’re correct, such as a copy of the paid off loan. This process can be time consuming, but it’s well worth it because you’re credit score can increase significantly once the errors are gone.
Pay down debt
If you owe any debt, pay down as much as possible. This will decrease your debt to income ratio and improve your overall credit score.
Don’t close long held accounts
Some people think that if they close some of their accounts, they’ll get a higher credit score because they won’t have as many lines of credit open. While this may be true eventually, in the short term, closing accounts, especially long held accounts, hurts your credit score. If you want to enter the housing market in the next 6 to 12 months, you don’t have time to rebound from the credit score ding, so you should leave your accounts open.
Improving your credit score can save you thousands of dollars over the next 30 years by helping you secure the lowest possible home loan interest rate. Doing your homework and taking the steps to improve your credit score are well worth the time and effort.