Video Transcript
You don’t need perfect credit to buy your
first house. You don’t even need average credit. Because you are more than just your credit
score.
But! If you have 30 days – between now and your
date of closing – you can use that time to make your credit score better – which will
– save you money – allow you to put less money down on your home – and – increase the maximum
purchase price and price range for your home. So – if you’re not already under contract
– and have 30 days – here’s what you should do – to raise up your credit.
All very manageable – definitely simple to
do. It starts with:
Step One – Get a mortgage approval. The mortgage approval step first – and has
to be – because getting a mortgage does two things for you – first – it tells you what
your score is now – which you need to know anyway – not optional – you’re buying a house
– you have to know – and you want to know – for all the reasons we’re discussing here
– and second – when you have your approval – ask for a copy of your credit report – so
you can find and fix mistakes.
Look – it’s not just likely that you’ll find
a mistake here – it’s probable. A third of people find something in their
credit that’s wrong and big enough to lower their score – for many people – it’s their
name – or their address – others find accounts in foreclosure that are not in foreclosure. Major mistakes like this – lower your credit
score – by as many as 100 points.
Mistakes like that will keep you from becoming
a homeowner – so get an Immediate Mortgage Approval from Homebuyer.com and actually get
a look at your credit. You can do that now on our website.. Two: Raise your credit card spending limits.
Now, this second step is counter-intuitive
for a lot of people so let me explain – what we’re doing here and why it works. 30 percent of your credit score is something
called credit utilization – how much of your available credit are you using? And that’s in percentage terms – not dollars.
It’s not how much are you borrowing in dollars
– total – it’s how much are you borrowing of what’s available to you – as a percentage. Which shows – how much capacity you have to
borrow more. And that extra capacity is a big deal with
your credit – because if something goes sideways in your life – and things always go sideways
– life is like that – things happen – and when they do – if your credit utilization
is low – it means you have a lifeline – you have credit – available to you – so you don’t
immediately lose access to money – you have spending capacity – you’re not maxed out – which
means you can handle financial setbacks or the loss of a job or illness – and keep on
with your life – and!
– keep on with your mortgage – which is what
your credit score reflects. So raise your credit card limits – increase
your capacity – get your cards – call the number on the back – ask the service rep – to
life your credit card limit. By simply raising that amount – with no other
change – your limits go up – your balances stay the same – so your overall credit utilization
goes down.
Now – one quick caveat here – when you call
your issuer – and ask for your higher limit – ask for the highest limit available without
checking your credit score. You want the most they can give without doing
a credit check. That’s an important point which ties into
point number 3: which is to not make it look like you’re out looking for new credit.
Don’t open new accounts. When you open a new credit account – it signals
– that you in search of adding debt – and that works against your goal to making your
score go up. Because when you seek new debt – for a new
car – for a loan somewhere – for a charge card to get 30 percent off when you buy something
retail – if you’re successful – in getting your new credit – it results in you taking
on new payments – new obligations – that make it less likely you will have money to make
payments on your mortgage.
When you add new credit – you add new burdens. But even if your request for new credit is
turned down – if it’s denied – just making the request makes a negative outcome – because
you sought new credit. Think about it: If your credit score exists
– to project financial strength – the simple act of looking for new credit – belies that
projection.
So don’t do it. Don’t shop for new cars. Don’t apply for credit cards.
Don’t transfer your balance to save money
– save all of that – for after you’ve bought your home. After that, use your credit how you want. Until then, wait.
Next, number 4: Get your bills current. Getting your bills current can be easy to
talk about and difficult to do – but if you’re able – use the credit report you got with
your mortgage approval – look for any account that’s one or two months late – and get it
current. You want as many accounts as possible reporting
that you are on-time – with your bills – because 35 percent of your score is just being on
time.
That’s the largest component of your credit
score. And we can think about this with an Isaac
Newton-type perspective – the first law of motion – the law of inertia – an object in
motion tends to stay in motion. And the law of physics – holds true with credit.
How you did with credit in the recent past
– is likely how you’ll do with credit in the near future. Which is why – a home buyer can have a bankruptcy
– or a foreclosure – a major credit issue – and still get approved to buy a home. Because after some amount of time has passed,
those events – of the past – no longer correlate with the future.
Events from the last 30 days – negative and
positive – that has a major effect on your credit score. Events from six months ago – some effect – but
not much. Events from 2 years ago – no effect at all.
So remember Newton’s law – get your bills
current – and project a good future – with one big warning. If you have collection items or disputes – that
are old – two years – or more – don’t bring those particular bills up to date – not just
yet anyway. When you take a 2-year old account and pay
it – it’s no longer 2 years old.
It’s now fresh – and that affects your score. A credit pro can help more with that – which
brings us to our last credit scoring tip to boost your score in 30 days: Number 5: Leave your accounts open. Now, we save this tip for the last tip because
home buyers are really good about following instruction and making credit score improvements.
It’s remarkable, really – but sometimes – home
buyers go too far. They go off script. And try to get creative.
So we added this last step for motivated buyers
that want to squeeze the most extra points – from their credit score possible – and that
is: when you bring accounts current – or pay them down to zero – leave your accounts open. Don’t close your accounts. Because – it might seem like it’s a good idea
to pay off a card and close it – or make an extra payment to end a car loan early – but
it’s not – for all the reasons we’ve discussed before.
When you close an open account, you reduce
your credit utilization – which means you have less available space to handle a life
crisis. You remove payment signals – that you’re paying
your bills on time – which lowers the largest component of your credit score. You reduce the average age of your open credit
accounts – also a factor in your score.
For all of these reasons – leave accounts
open. So with 30 days available – you can make your
credit score stronger – you can attract a lot of credit score points which will get
you a lower mortgage rate, lower down payment options, and a bigger budget for housing. That means more home – for the same monthly
payment.
It’s beautiful landscaping and mature trees
– a larger garage or even just a garage – for cars and storage – it’s a home in the neighborhood
you really love – that’s what a higher score gets you – and getting that higher score – and
the home of your dreams – it starts with getting an immediate mortgage approval from our website
– it’s available all day, all night, no paperwork – immediate results. [OUTRO] Don’t forget to visit our website to get your
credit score – and your mortgage approved – at today’s mortgage rates. I’m Dan with Homebuyer.com – the mortgage
company made for first-time buyers.
Happy homebuying.
