Your Credit - Need To Know
today we're going to talk about something that is very important When you are getting any kind of mortgage, your credit.
It is something that most people really don't understand. To be honest, I wish somebody told me this when I was in my 20s. It's so simple, so attainable, but most people just don't understand it.
There's three things that are really important for your credit when applying for a mortgage application.
Number one, never miss a payment. This is crucial. It looks terrible on your credit and can affect your mortgage qualification. Even your cell phone bills, and we see those a lot. One way to ensure that you never miss a payment is to set your payments as automatic withdrawals with your institution, so your credit card or sorry, your cell phone bill should come out of your account automatically. So you never missed that your credit cards as well set them up as an automatic minimum payment every month, so you don't have to have the full balance available to you in your account, just the minimum. It's like 10 or $20 a month, but it makes sure that you never, ever miss a payment.
Number two, keep your balances below 50% of their limits at all times, if possible. This is a hard one. Sometimes we have some clients that use their credit cards regularly throughout the month. They always pay them off on time, but because of their large purchases, their balances are often close to their limits throughout the month. This actually has a very negative impact on your credit score. One way that you can avoid this is by being proactive and paying that balance down. Perhaps before it's due, just to make sure that you are keeping it at a lower amount. But the other way that I would recommend that you do this is as an example, if you aren't constantly spend $10,000 a month on your credit card, ask your credit card company to increase your limit to $20,000 so that you can maintain your regular spending habits, but never be maxed out on your cards, and always have that 50% sort of balance to limit ratio.
Number three is really important for our lenders. To show them two trade lines that have been actively reporting for at least two years. So although we have some clients that are really good with their money, never want to have any debt and pay cash for everything, that doesn't help you when you want to get a mortgage, and the lender needs to see how you've repaid loans in the past so that they can be more comfortable to loan you money in the future, it's important that you have these two trade lines. It can be two credit cards, it can be a credit card and a line of credit. Really, anything but two is important. The minimum limit should be $2,000 and it should be reporting for at least two years. So have a look at your credit. Now if you don't have these things, get started early so that you are prepared for your pre-approval.
That's it for now. Call our team if you have any questions.
