First, let us know why does credit matter when buying a home? We will help you understand what you need to do before buying your first home in Houston. The process of buying a home not only starts with searching for an ideal place, a good credit score is also important.
There are 3 different FICO scores you need to know in order to buy a new home. To calculate the FICO score, 5 components of your credit report is considered. Other factors that need to be observed is your income, how long you have worked at your current job and the kind of credit you want.
5 components of your credit report
- Never miss your payments, I repeat never because the first component which is considered is your payment history. The history is about 35% of your FICO score, thus, is the essential factor in a FICO score.
- The second most important feature FICO score looks for is the amount you owe. This is the 30% of your FICO score. Remember, having credit accounts and owing money does not certainly make you a high credit risk.
- Length of your credit history also matters in your FICO score. The longer the credit history the better is your FICO score. The length of the credit history is 15% of your score.
- Credit mix is the fourth factor which is considered. FICO considers a mix of credit cards, retail accounts, and loans you recently have. It is about 10% of your score.
- The new credit is the last factor which is observed that how much new credit you have applied for opening several accounts in a short period of time. Thus, can cause greater risk. This is the 10% of your FICO score.
With a good credit score, more loans can be approved and also help you to save money with a lower interest rate on your loan. So, these were the reasons why improving your credit is important.
Now, let’s see how you can choose a Credit Repair Companies of Houston, before buying a home in Houston.
- Nearly 25% of people have been declined for a mortgage as it contains errors on their credit reports. So, it is very important to first get your mistakes fixed. Keep a close eye on your credits so that you can fix your mistakes even before you apply for a mortgage.
- Another way to improve your credit is to make payments that are greater than your minimum payment. This would not just make the minimum payment look bad to potential lenders also you can save money on interest.
- This one is an easy way to build your credit score, keep the balance less than 50% of your limit on every card and account.
- Instead of moving your debt from card to card in low interest, pay off (debt) what you can.
- This is the biggest mistake generally homeowners make, they buy a car in 3 months before applying for home loans.
- To increase your credit score to 100 points, planning is important. Try to pay down your debt even before filling out the application.
- Last but not the least, stay up to date. Pay your bills on time so that you never miss any payment.
If you have any doubt regarding the same feel free to contact us here.