Buying a house in Lakewood, Long Beach, or anywhere else is a big deal—and it’s one of the biggest financial decisions you’ll ever make. If you’re like most people, you’ll have to work with a lender to get a mortgage loan… and that requires a decent (read: 620 or higher) credit score.
The higher your credit score is, the more likely lenders are to offer you favorable terms on a mortgage. You want a fair interest rate, because a typical mortgage lifespan is 30 years; that’s a long time to be saddled with a high interest rate.
While the interest rate isn’t the only factor you should look at on a mortgage (you also need to consider the lender’s reputation for customer service, the types of fees they’ll add into your mortgage, and a handful of other issues), it’s a big one—and that means you need to make sure your credit score is up to par before you start applying for loans.
What is a Credit Score?
Your credit score is a three-digit number between 350 and 800 that shows lenders how likely you are to pay your debts on time, whether you’ve ever defaulted (failed to pay) on a loan, and whether you’re a huge credit risk. A low score can tell lenders that you’re a big risk, which means you’re either going to face high interest rates or, worse, be denied a loan at all.
These scores are calculated by the three main credit bureaus: Equifax, Experian, and TransUnion. They look at:
How long you’ve had credit
The types of credit you have
Your credit limits (and how much you’re using)
How much debt you have
How many lenders have checked your credit
Different lenders have their own standards, but typically credit scores are judged this way:
How to Boost Your Credit Score to Buy a House in Lakewood
First things first: Get a copy of your credit report. Thanks to the Federal Trade Commission, you’re entitled to one free copy from each of the major bureaus every year. You can get yours from AnnualCreditReport.com.
When you get it, make sure there aren’t any errors. If there are, dispute them using each agency’s dispute procedures. (You can find them here: Equifax disputes, TransUnion disputes, and Experian disputes.)
Your first step is to try to pay down as much debt as possible. That could mean paying an extra $50 on each of your credit cards each month or pooling your money to pay off an entire balance. The point is that you want to minimize the amount of your available credit that you’re using.
Don’t make any major purchases for at least six months before you plan to apply for a mortgage, either. Only apply for credit when you need it.
Another mistake many would-be homebuyers make is closing unused accounts. When you close an account, you’re shortening the average length of your credit history—and that makes you look like a new borrower.
It might also be worth looking into transferring balances from a high-interest card to one with a lower interest rate.
It’s important to remember that lenders don’t typically report payments more than once a month. That means what you do today may not show up on your credit report for another 30 days or so, so it’s important to get a head start if you’re trying to boost your credit for a mortgage.
Are You Looking for a Home in Lakewood, CA?
If you’re looking for a home for sale in Lakewood, we’d love to help you find the perfect match.
Call us at 562-882-1581 and let us know what you’re looking for so we can begin a custom search just for you.
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