Your credit score is an essential piece of your overall financial health and an important factor in the mortgage process. Mortgage lenders use your credit score to assess your financial responsibility, including how diligent you handle loans that have been granted to you. Borrowers with higher credit scores have a better chance of getting a favorable interest rate from lenders. If your credit score is lacking, here are some steps you can take to raise your credit score in Virginia and gain access to a better mortgage rate.
Always Review Your Annual Credit Reports
You may understand that your score is low, but without proper monitoring, you may be at a loss for exactly why it is that way. What some people don’t know is that you’re entitled to an annual report from the three major credit reporting institutions, TransUnion, Equifax, and Experian. Simply follow this link to gain access to the portal for your credit reports. It’s important to gather a report from each institution, as the information they have available may differ depending on what sources report to them.
Avoid New Loans
If your ultimate goal is to improve your credit to achieve a favorable mortgage rate, it’s advisable that you don’t take out any new loans for at least a year prior to applying for your mortgage. A new car can wait when you’re ready to get into your dream home.
Determine Your Outstanding Debt
Your outstanding debt is a significant factor in your credit score and is also information a lender will inquire about when you apply for a mortgage. Take stock of all your outstanding debt, whether it be credit card debt, medical debt, student loans, car loans, or any other money you’ve borrowed. Organize the information by loans that you can most feasibly pay off and begin formulating a manageable strategy to tackle that debt. This is a crucial step to increasing your credit score in Virginia.
Change Your Payment Strategy
For many types of debt, there are tools you can use to make the process of paying it off easier. Autopay for credit cards is a smart option that ensures you never miss a payment and aren’t assessed a penalty on your credit score. Paying twice a month can help you pay off your principal further and avoid accruing interest. For larger debts such as student loans, determine if there is a payment plan option that can help you make consistent payments and chip away at the overall debt.
Ask for Higher Limits (If You Can Avoid Spending)
Raising the limits on your credit cards may sound counterintuitive to increasing your credit score, but it’s actually a sneaky strategy that can be very useful. When you raise the limit on your credit card, you lower your overall credit utilization ratio, even if your spending doesn’t change. The credit utilization ratio is an important factor that can lower your credit score without you even realizing it. However, for this strategy to work, you can’t increase your spending to correlate with the new limit. So keep your spending where it is, and reap the benefits for your credit score.
There’s more to the mortgage process than just attaining a good credit score in Virginia. For all of your other mortgage needs, the expert team at Federal Hill Mortgage is here to help. As the top-ranked mortgage brokers and lenders on the East Coast, our team can help make your dream home a reality. To get started, apply now.
