Navigating your credit score can be extremely confusing if you don’t know what goes into determining your score and what causes it to go higher or lower over time. When you’re attempting to get a mortgage loan, having good credit is a major factor. If you’ve recently learned that your credit isn’t so great and you aren’t sure why these reasons are likely to blame!
Late or Missed Payments
One of the most important aspects of your credit score is your ability to make payments on time. Missed and late payments lower your score. Be sure you’re making all of your payments on time with no exceptions to raise your credit score and avoid costly late fees.
Poor Debt to Income Ratio
Your debt-to-income ratio is the total amount of debt you owe compared to your annual income. If your amount of debt is higher than it should be for your income, it will lower your credit score and lower the likelihood of another creditor wanting to work with you. Focus on paying down outstanding debt to improve your debt to income ratio before acquiring new debt.
Too Many Credit Inquiries
Each time you apply for a new line of credit and the creditor pulls your score; it actually lowers your credit score. The amount it’s lowered is insignificant if it’s only one or two inquiries, but too many inquiries will harm your score. In this case, avoid credit inquiries for a period of time and be more particular about how often your credit is being pulled in the future.
Closing Credit Cards
Part of your credit score is determined by the length of your credit accounts. If you close an account that you’ve had for a while, it harms your score. Keep your accounts open and use them periodically to benefit your score. Focus on keeping your credit usage below 30% and maintaining an active account instead of paying it off completely and closing the account.
Bad Debt to Credit Utilization Ratio
The debt to credit utilization ratio refers to how much of your available credit line you’ve used. If all of your lines of credit are maxed out or close to being maxed out, your credit score will seriously suffer. Prioritizing paying down your debt to improve your credit utilization ratio is one of the quickest ways to raise your credit score.
To learn more about your credit score and how it may impact your ability to purchase a home, contact me today! Lamacchia Realty is a leading real estate agency in MA, NH, and FL, and has experience working with clients with a wide variety of different credit types.