How To Maximize Credit Scores To Qualify For Home Loan
Tips On How To Maximize Credit Scores To Qualify For Mortgage:
Your credit and credit scores are one of the most important factor that dictates whether you will get a loan approval and how much interest rates you will be charged on credit cards, auto loans, and mortgage loans. Having bad credit and low credit scores will cost you tens of thousands of dollars, if not hundreds of thousands of dollars, over the course of your life in higher interest costs. Here are some tips to maximize your credit scores and things to avoid from hurting your credit and credit scores.
How To Maximize Credit Scores: No More Than 25% Of Credit Limit
Carrying high credit balances will definitely lower your credit scores. However, the good news is that the drop of credit scores due to high balances is just temporary and your credit scores will go right back up when you pay down your credit balance down to 25% of your credit limit. Having a 25% credit balance or less will maximize your credit utilization ratio which comprises 30% of your overall credit score.
How To Maximize Credit Scores: Never Close Out Open Credit Cards
Closing out an active credit card account will hurt your credit score. Many people close out credit card accounts that they no longer use, however, by doing so, they are hurting themselves and killing credit that has been seasoned. The reason this hurts your credit scores is because this task will lower the amount of credit you have available to you which will lower your debt utilization ratios. The longevity of your credit history is part of your overall credit score so keeping a credit card that has been aged will help maximize your credit scores.
How To Maximize Credit Scores: Avoid Late Payments
Your payment history will make up 35% of your credit scores. Recent late payments will most likely drop your credit scores at least 50 plus points and will take months to recoup this loss. Many mortgage lenders frown on any late payments in the past 12 months and a large percentage of them will not accept any mortgage loan borrower who had a late payment in the past 12 months. There are mortgage lenders that will not accept anyone who had a late payment after a bankruptcy and/or foreclosure.
Each hard credit inquiry can drop your credit scores by 2 to 5 points. If you need to apply for credit, do so but do not apply to a dozen creditors all in a month. Aggressive credit inquiries will not only drop your credit scores but will also create a red flag to potential creditors. Creditors will look at too many inquiries as a credit risk that the person applying for credit can become overextended and pose a high credit risk, thereby, denying the credit request.
Borrowers With No Credit Scores
For those with no credit and no credit scores, this can pose a problem also. Having no credit or credit scores can similar to having bad credit because creditors will not extend credit to those with no credit or payment history. Everyone should start establishing their credit as soon as possible. The best way to establish new credit or re-establish bad credit is by getting three secured credit cards with a minimu of a $500 credit limit.
Having a diversified credit profile is important. By diversity, we mean not just credit cards but credit cards, auto loan, installment loans, mortgage loans, etc. Diversity of credit account 10% of your overall credit score.