When it comes time to buy a house or make any large purchase, you’re thinking long and hard about your credit score and how it will affect your buying capacity. For more information on how your score is calculated and what range you want to be in check out our resource on FICO scores, credit reports and more. So if home buying and securing a mortgage is on the horizon for you, then take a look at what affects your credit score – for better or worse.
What’s good for your credit score
- A long and varied history.
- A long standing installment loan like a car payment.
- Making credit card payments on time and never missing a payment.
- Low credit utilization – it’s even better than having none at all.
- Paying down installment loans like a car payment. This is a good sign that you’ll be able to repay a mortgage payment.
- Transfer balances from one card to another in order to even out your usage. This is a way to achieve a lower credit utilization.
- Spread out charges between a few cards – instead of maxing out just one card.
- Check your report for errors and get them fixed.
- For tips on how to improve your credit score read these 9 quick tips.
What’s bad for your credit score
- Opening new credit card accounts. Some people think this will help increase your available credit but it can actually lower your score.
- Lots of recent credit searches aka hard searches done by lenders when you apply for a loan or new credit card. However if you are rate shopping and checking your own credit several times in a short period, it only counts as one query if it’s done within the same 14-45 day period.
- Using a high percentage of your available credit.
- Having a large number of accounts with amounts owed.
- Making large purchases. If you’re about to buy a home don’t make any big purchases – it will be a red flag to lenders who are keeping a very close eye on your finances.
What some say is ugly but DOESN’T actually affect your credit
- Owing money on credit accounts – as long as your balances are low and you pay them regularly, your credit score is just fine.
- Closing unused credit accounts that are paid off. Some people think having fewer accounts looks better and can raise your FICO score but that’s not the case. As long as you have low to no balance, it makes no difference.
The easiest way to prepare yourself for home buying and get your finances in order is to talk with a professional about the do’s and don’ts. You can find a First Team agent online and schedule a buyer consultation to make sure you’re making the right financial decisions. Or if you’d like us to do the searching for you, just reach out.