Good credit plays a key role in your finances. Increasing your score can come with a number of benefits, such as:1
- Making it possible to qualify for a larger selection of loan options
- Giving you access to lower interest rates
- Making you a candidate for more credit options, like higher credit limits and better credit card rewards programs and offers
When it comes to buying a home, those first two benefits really come into play.
Having access to more mortgage options means you can find the one with the best interest rate, term, and down payment requirement for your unique financial situation.
Plus, a lower interest rate is key when it comes to home affordability. When you pay less in interest each month, you have more room in your monthly payment to pay down your principal. That means you can afford a more expensive home without raising your payment.
Five Strategies to Boost Your Credit Score2
Pay your bills on time. Your credit score is used to gauge how likely you are to pay what you owe, so not paying on time is going to impact your number. Help yourself out by setting reminders when payments are due or leveraging automatic bill pay.
Pay down your credit card balances. This brings down your credit utilization ratio: the amount of credit you’re using compared to what’s available to you. A lower number is generally seen as an indication that you’re not overspending and that you’re managing your credit responsibly.
Don’t close old credit accounts. Your credit score factors in the length of your credit history, so even if you’re not using an old account, keeping it open can benefit you.
Only open new accounts you really need. When you apply for credit, the inquiry is recorded on your credit report and can temporarily lower your score. So make sure to apply only for accounts you actually need and are going to use.
You can also check out resources designed to help you understand what credit is and how you can build it. Freddie Mac’s CreditSmart learning paths cover those topics and others like how to read a credit report and how to protect yourself from fraud.
What credit score do I need to buy a home?
Every mortgage product is different when it comes to credit score requirements.
If you’re interested in knowing which home loans you could qualify for,2 your best bet is to connect with one of United’s mortgage experts. A member of our team will learn more about you and your short- and long-term financial goals to create a custom plan to get you closer to homeownership.
1Not all borrowers will see benefits listed.
2Information included is intended to be informational in nature only. Consult legal, tax, and financial advisors for advice.