When you’re applying for a mortgage, your credit score is one of the first things lenders will look at. A higher credit score means you’re seen as a lower-risk borrower, which could lead to a lower interest rate on your mortgage. There are two main types of credit scores: FICO® Scores and VantageScores.
FICO® Scores are created by Fair Isaac Corporation (also known as FICO). These credit scores range from 300 to 850.
VantageScores were developed by VantageScore Solutions LLC (formerly known as Experian), an international credit scoring company headquartered in Costa Mesa, California. These credit scores range from 501 to 990.
1. Don’t make late payments on your bills. This will damage your credit score and make it harder to buy a home in Texas.
2. Don’t close old credit cards. This can also damage your credit score.
3. Don’t open new lines of credit unnecessarily. Each time you do, it lowers your average credit history, which can hurt your score.
The key is to only take out credit when necessary (for example, if you need financing for an emergency). If possible, pay off the balance before the end of the month so there’s no monthly interest charge.
1. Check your credit report for errors and dispute any that you find.
2. Pay all of your bills on time, including utility bills, credit card bills, and other debt payments.
3. Keep balances low on your credit cards; maxing out your cards can hurt your score.
4. Pay off debt rather than moving it around; paying off collection accounts and charged-off debts can improve your score.
5. Use a mix of different types of credit, such as revolving credit (credit cards) and installment loans (auto loans). 6. Ask family members or friends who have high credit scores to help add their names to your credit card or loan applications.
6. Keep new credit lines open but use them sparingly; opening new credit lines will increase the average age of your accounts and this is good for your score.
7. If you don’t use credit cards much, ask if the bank will give you a secured card with a deposit equal to the limit on the card so that you can build up a solid history of using credit responsibly before applying for an unsecured line of credit with the same bank later on.
8. Request copies of your credit reports from all three credit bureaus (Equifax, Experian, and TransUnion) at least once a year to make sure there aren’t any errors.
9. Sign up for automatic payments from your checking account or set up automatic bill pay from your checking account to avoid late fees and potential damage to your credit score caused by late payments.
Now that you know how important your credit score is to buy a home in Texas, it’s time to take action. Review your credit report for any errors and dispute them if necessary. Then, start paying all of your bills on time, every time. You should also try to keep your credit card balances low and only use small amounts of your available credit. Doing these things can help boost your credit score and improve your chances of getting approved for a mortgage. There are so many benefits to having good credit: not only will you have more options when it comes to mortgages, but your credit score will come in handy later down the line.
The credit score you need to buy a home in Texas varies depending on the type of loan you’re using. For conventional loans, you’ll need a credit score of at least 620. For FHA loans, you’ll need a credit score of 580 or higher. And for VA loans, you’ll need a credit score of 540 or higher.
To boost your credit score, try these four tips:
Texas homeowners can get help from their Credit Union with improving their credit scores. They offer free credit education courses that teach homeowners how to build good credit habits and they also offer financial literacy workshops.
They offer personal one-on-one coaching where you can learn about budgeting and make better financial decisions as well as how to improve your credit scores. Credit unions also offer no-cost housing counseling sessions where they discuss all of the details about buying a home and provide advice on applying for mortgages with low-interest rates and good terms that will be easy to afford.
Many people mistakenly believe that if they have bad credit there is no way for them to qualify for a mortgage but this isn’t true!