Let’s Talk About Credit

Let’s Talk About Credit

Credit can be a scary thing to discuss. The word “credit” can describe so much about your financial capabilities and outline your financial deficiencies. But credit is not something you can escape if you wish to apply for a mortgage. The best thing to do when talks of a mortgage are beginning is to get familiar with your own credit score.

What is a credit score?

Your personal credit score is essentially a story of your past dealings with credit lenders. This can be credit cards, car loans, financial institutions, student loans etc. Any institution that you have borrowed money from submits regular reports to the credit bureau and this creates the story of your credit history. If you thought that your unpaid cell phone bill from five years ago was out of your life, think again. Credit bureaus receive information and keep a running record of all reported credit, good or bad.  Your credit score is generated from the compilation of submitted records and your eligibility for a mortgage is assessed by how well you scored.

How do I improve my credit?

If you do not have perfect credit don’t worry you are not alone. Many people need to work hard at improving their credit before buying a house. Here are some ways you can improve on your credit.

  • Do not max out your credit cards. Do not let your credit cards reach more than 75% of the maximum spending limit, obviously if you can keep them paid down to a lower percentage or paid off each month that is the best option. Constantly maxing out your credit cards indicates you may have a spending problem or not be responsible with credit.
  • Pay off outstanding old bills. If you have an old cable bill, for example, the cable company has already submitted your negligence of payment to the credit bureau. Pay the bill and contact the cable company directly to request they remove the negative comment to the credit bureau. The fewer negative points you have on your credit score the better.
  • Keep your credit cards to a minimum. Do not apply for every credit card that offers you an incentive. Having access to too much credit is not seen as a good thing, especially if the credit cards are opened close together in time. A rush in applying for multiple credit cards could look like you are experiencing financial difficulties.

Credit is a tricky thing that is not built overnight. For more information on how to build up your credit feel free to contact the Mortgage Advisors for professional advice.

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