Q: What do you advise a financially fit homebuyer to do to increase their credit score or make themselves more attractive buyers, to qualify for the lowest mortgage rates?

A: A FICO score of 700 (FHA)/740 (Conventional) or better qualifies you for the lowest rates. In fact, it qualifies you just as well as a higher score, so if you’re at or over 700/740, there’s no loan qualification rationale for investing effort into boosting it. But these are firm breaking points. The difference between a score of 698 and a score of 700 (in an FHA loan scenario) can cost you a quarter of a point in interest, or thousands of dollars over the life of your mortgage.

I’ve found that people asking about how to boost their credit to qualify for the best interest rates is similar to people asking me how to lose weight: I tell them the truth, then their eyes glaze over when I give them the straight dope, no magic bullets. No one wants to hear: eat vegetables, cut the sugar, and exercise; similarly, they don’t want to hear pay your bills on time, every time.

But I’ve been asked this question a lot recently, so here goes, anyway!

1. Pull your reports online – get them for free, no strings attached, at the government authorized website AnnualCreditReport.com. This doesn’t get you your actual FICO scores, but it does get you the content of your report. Look for errors that could be depressing your score, like accounts that don’t belong to you, balances that are actually lower than reported, old debts that are paid off that should have been removed entirely (7 years for credit cards, 10 for bankruptcies).

2. Consider reopening accounts you thought were open but have been closed because you haven’t used them in so long - it will help boost your utilization ratio, one element of your credit score that is dependent on how much available credit you have.

3. Pay down some debt. This both decreases your debt-to-income ratio (36% is the goal, including the proposed mortgage payment) and increases your credit score, if you do it right (see the next tip).

4. Don’t close any accounts. Instead, spread your debt out. The ideal utilization ratio is about 20-30% of your available credit overall, and on any given account. Closing accounts reduces the amount of credit that is available to you, so it makes it look like you’re closer to being maxed out.

So if you have one card that’s near its max and several others that have zero balances and you’re trying boost your score a bit, quickly, consider balance transfers to spread out your debt more evenly, aiming for 20-30% of the available credit on each card.

5. Use your credit regularly – and pay it on time, every time: Having a good FICO score doesn't happen because you have sound personal finances, including no debt. FICO scores are a measure that shows that you have a history of responsibly using and managing and repaying your debt on an ongoing basis.

6. Finally, check in with your mortgage broker. Have them pull your report and score, as the report they pull is the one they’ll have to go by in the final analysis. If you’re really close to a score level higher, that would empower you to qualify for a lower rate, they can actually run a credit diagnostic on your score and generate some recommendations for which actions you could take to raise your score by the needed few points. Then many of them can do what’s called a ‘Rapid Rescore’ – once you’ve paid that bill off, they can actually submit a request directly to the credit bureaus to update that information and your score in just a few days.

None of these tips will get someone with a 500 credit score to a 700 (other than a massive debt reduction program). But if you’re trying to get a little boost to get you over a credit score hump, these can be potent, and save you beaucoup bucks in interest.

As a REALTOR® and Builders Agent in the Mississippi, Hinds, Rankin and Madison County markets for over 20 years, I have assisted many families in the purchase of their first home and or Building of their Custom Homes in all shapes and sizes. To all my past Customers and Clients, It has been my passion and pleasure to serve you in the Real Estate Sales Capacity!  I Thank you all for allowing me to be a part of your life's journey into home ownership.

The relationships I maintain with all our Great Local Home Builders, Contractors, Attorneys, Real Estate Appraisers and Home Designers will be passed on to you!

Whether you would like to be the 1st Owners of a New Home, completed,  already under construction or we start from scratch, you will see and choose, the floor plans, list of material, amenities, neighborhood demographics, Builder and Designer, before and after you are handed the KEYS to your NEW HOME.

If you're considering Building your Dream Home or Custom Home, Now is the time to Contact Us! Before you, purchase blueprints, a home site, or spend any money on the project at all. The Home Building Systems that we have in place could be your best opportunity to have the New Home you want, and have the Most Home for your Money.

Hundreds of Floor Plans, in all sizes!  Home Sites in Great Neighborhoods or in the Country, Available to you upon your request.

All Included with goflatfeerealty.com FREE BUYERS SERVICE! Just let us know what you are looking for in your New Home, size, number of bedrooms & baths, if you want to be in a neighborhood or if you would like to build on acreage. I'm always happy to speak to you!  So let's get started Building Your Dream!

Pete Prisock/RE Broker: This e-mail address is being protected from spambots. You need JavaScript enabled to view it    cell # 601-291-5863

 

 

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