If you are hoping to make a home purchase in the near future, you certainly want to get the best rate and terms as possible. If you want to get the best terms and rates available, it is essential that you build a solid credit rating. If your credit rating is less-than-ideal, or if you simply want to improve it in order to get the best deal possible, follow these simple steps to help improve your rating.
Pay Your Bills On Time
Obviously, the best way to establish a solid credit rating is to make sure you get your bills paid on time. Believe it or not, even having outstanding library fines can have a negative effect on your credit rating. Therefore, you need to make certain to get all of your bills paid on time if you hope to improve your credit rating.
Acquire Additional Credit
If you do not have a credit card or have not taken out a loan in the past, you may have a lower credit rating simply because you havenít had the opportunity to prove your ability to be financially responsible. In order to improve your credit rating, you might want to consider applying for a credit card or a small loan. If you do apply for a credit card, however, make sure you pay off the balance each month when you receive your monthly statement. That way, you wonít build up an insurmountable debt that harms your credit rating more than it helps.
Keep Your Debt Ratio Low
If you already do have credit cards and you are carrying a balance, you need to work at paying down your debts. Even if you are making your monthly payments on tie each month, simply carrying a large debt on your credit cards can be detrimental to your credit rating. In fact, your debt-to-credit ratio can have a major impact on your credit rating. Ideally, the amount of debt you carry on your credit cards should be equal to 30% or less of the amount of credit you have available. If your debt is higher than this ratio, lenders begin to consider you are bigger risk.
Donít Apply for Too Many Loans
Keep in mind that simple inquiries into your credit rating can have a negative impact upon it. This is because some lenders consider excessive inquiries to be an indicator that you are financial troubles and in need of money to get through a tight spot. Therefore, you should keep the number of applications into credit cards and other loans down if you hope to build your credit rating.
If you take these steps to improve your credit rating and if you have been employed by your current employer for several years, you will have the best chance of getting great mortgage terms and finally buying that house of your dreams!