When you want to learn how to increase your credit score fast to buy a home, there are several steps you can take. Understanding this process is crucial as you plan to buy a home, but you also need to make sure that you take all the parts of the home buying process seriously.
A few tips are listed below to make it much easier for you to get the results you want. You can work with your family or partner to complete these steps, or you can handle this process on your own when you are ready to buy a house.
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Call a Loan Officer
As you get started, you need to call a loan officer. Calling a loan officer is a good idea because they can give you an idea of what they can do for you. Plus, they can tell you how to increase your credit score fast to buy a home. They will generally give you a list of things you can do, and they will start explaining any particular thing that might need to be done.
You do not need to check your credit, calculate the down payment, or pre-qualify yourself. The loan officer does all these things, and they will stay with you throughout the whole process. You can turn to your loan officer at any time, and you can ask them questions if you need to make changes to your plan.
Check Your Credit
You can use free credit checking services that make it easier for you to get a good idea of how your credit looks. However, it would be best to keep in mind that these credit services look different from what the loan officer will see. Even so, it is much better than knowing nothing.
The three credit services are Experian, TransUnion, and Equifax. They all have their own apps, and you can even get a free credit report every year under the law. Go to annualcreditreport.com for more information, but remember that your loan officer can also check for you and check again when they feel it is appropriate. They also can check your credit without it impacting your score.
The loan officer will explain the scoring you have now, and they can talk to you about how to increase your credit score fast to buy a house. They can set up a plan for you to change your score, and you can follow their plan to get the best results.
What Is a Credit Score?
Your credit score involves all the financial decisions that you have made over the years. Your credit score changes because of these decisions, and it involves things like mortgage payments, car payments, credit cards, medical bills, and other things that report to the credit bureau.
This information is important to remember during the home-buying process, but you should also not forget that most credit bureaus are different. They do not all get the same information, and their scores will never be the same.
The credit score checks:
- Payment history
- How much you owe
- The duration of your credit history
- Any new credit
- The mixture of credit you have
FICO scores are different because of the various information these bureaus have. That is why you need to contact each one if you notice anything incorrect. Moreover, you should not make any big purchases leading up to buying a home.
Credit score margins change every day, but under normal circumstances, most people need to have a credit score somewhere between 580 and 640 to consider purchasing a house. However, while this range is consistent with past years, it could quite literally change tomorrow due to the recent COVID-19 pandemic and its effect on not only the housing market but the economy in general.
In other words, it’s best to stay up to date on what a viable credit score is when it comes to buying a home.
Next Steps
When you work with a loan officer to learn how to increase your credit score fast to buy a home, they will use a simulator that explains which debts you should pay to raise your credit score. Because of this, you can easily follow their plan so that you can increase your credit score.
Aside from this plan, you can use a simple list of steps to get the results you want. Try this plan if you are not using a simulator:
- Make a list of all your debts from the smallest to the largest
- Pay off the smallest balance first and move to the next
- Continue this process until you have paid off all your debts
Most people can go to their loan officer for a credit check, and they will find that it is much easier to raise their credit score using this plan. If you have many debts to pay off, your loan officer can tell you which ones they would pay off to get your credit score to the right place.
As you complete this process, all the money you paid into your smaller debts can roll over into other debts. This approach makes it easier to pay off more significant debts, and you can create a calendar that tells you how long it will take to pay off most of these debts.
Can You Get Help?
If you’re still a ways off yet from buying, you can leverage existing rental payments to start boosting your credit score with rent reporting. It’s an easy way to benefit from the payments you are already making.
Credit repair companies can also help you with these issues because they can create programs that make it easier for you to pay off your debts. If you take out loans from some of these companies to pay off your debts, and once they’re paid off, you can clean up your credit. Doing this ensures that you have one loan that you are paying off routinely.
Also, some apps can help you with budgeting and paying off your debts, such as Mint and You Need A Budget (YNAB). Many people try to do all the work by hand, and you could write all this information down on your own. However, putting the data into an app is much easier for everyone.
You should write up all the money that you make and all the money that you spend. You can see how much money is left over to pay for other debts, and you can continue to add money to pay off debts as you prepare for your loan.
It would help if you did everything you can to stick to your plan to buy the home of your dreams. Do not allow your goal to be derailed by buying things on a whim or spending money you don’t have. As you continue to pay off debts, you may also have extra money left over to pay for emergencies as they arise, something we all know is possible.
The Down Payment
The down payment for your home can be anywhere from 3.5% up to 20%. Most people will go for the 3.5% option to afford to pay off more debts. There are also USDA loans that have no down payment at all. Ask your loan officer if you qualify.
As you learn how to increase your credit score fast, you should also save money every month to pay off your down payment. You can work with your loan officer to determine when to start saving because you are ready to buy a house. At this point, the loan officer will give you a letter explaining that you are pre-qualified for a loan. You can show this to real estate agents and look at houses. You can even go under contract while the loan is being finalized.
You should also consider how paying off your debts and saving for a down payment affects your debt-to-income ratio. This number is not only vital for you, but it is also crucial for your bank. You will need to make sure you are not over the number that the bank uses to determine whether you qualify for a loan or not.
For most banks, the debt-to-income ratio they want to see is around 50%. In other places, it might be about 55%. In other words, the amount of your debt, including the proposed home loan, should not equal more than half of your gross income.
Talk to your loan officer about how to drop below that number and save for a down payment. The loan officer can also explain when you need to arrive at that ratio to finalize the loan. Because this is a long process, you should work directly with the loan officer to get the timing right.
Now that you know what you are doing, you can make a plan that helps you understand how to increase your credit score fast to buy a house. You should always stay in touch with your loan officer, and you need to make sure that you have come up with a plan to close on the correct date for your situation. There are several things to consider, but you must work on the loan, your debts, and your credit score first.
Matt is a veteran of the moving industry, a recognized moving expert and is the founder of Mover Focus. Matt holds a Bachelor of Commerce (BCom) majoring in Finance and Marketing and Bachelor of Arts (BA) majoring in Economics and History. He also has completed the EiM (Essentials in International Moving) course from the FIDI Academy. His advice has been featured in Reader’s Digest, Yahoo Finance, MSN Money, Business News Daily and The SpareFoot Blog Go. Read more.