Credit scores are something very few of us spend much time thinking about; until we’re thinking of making a big financial decision like; buying a home, car etc. But if you want to estimate a budget to buy a home, it is important to understand the credit score and the loan terms.
There’s no need to start binging on all essentials instead, start establishing habits now to keep your credit score in the best range possible;
1. Accounts: Manage your accounts and cards effectively also as much as possible try to make on-time payments. Also make sure to pay off your cards as early as possible as a balance on your card can impact your score negatively. Best approach is to have one or two cards that suit your needs and have the best terms, rewards
2. Old Accounts: Your credit score is largely based on the average length of your credit history something you could inadvertently change by closing old accounts. Say for instance you have one credit card that has been open for 15 years and two others that have been open for three years and four years respectively. By closing the oldest account, you’ve essentially cut the length of your credit history in half. If the card issuer threatens to close inactive accounts on your behalf, consider using the card for one purchase and paying off the balance immediately.
3. Bill Payment: Making on-time payments may seem like common sense, but considering the heavy weight payment history carries in determining your credit score, it’s a message worth repeating. Payment history accounts 35% of your credit score. This includes payments made even a few days late to missed payments resulting in an account sent to collections. With payment history, it’s all about longevity the longer you’ve gone with a spot-free payment record, the better your score looks. If you do miss a payment and it lands on your report, only the passing of time will lessen its impact.
4. Manage Balances: Pay the balance as early as possible if you can, this will help your score look good as the more available credit seems you look more credible to potential lender. Credit utilization accounts for 30% of your score and is viewed as how much credit you have and how much is available. The thumb rule is keep your utilization 30% or lower.
5. Theft: Keep a close eye on the balance and the charges reflecting as identity theft can ruin everything. It has become rampant in recent years and the best to track is getting a free credit report to rule out the possibility.
Establishing strong habits now will help you to boost your score and prevent credit problems when deciding to buy real estate. Remember the stringent path you follow the better it will be your credit score in the long run.