Save money and qualify for the best home loan by getting your credit score in top shape before you buy.
When clients have their first call with a Lennar Mortgage Credit Specialist, there's one important topic that always gets covered: Credit score.
A credit score is a snapshot of a borrower's financial behavior which helps a lender determine if giving that borrower a loan is a high- or low-risk prospect.
Lower scores, in the 500s, can have a hard time qualifying for a loan at all, while higher scores, in the high 700s and 800s, open up opportunities for more loan products at lower, more competitive interest rates. The lower your interest rate, the more money you save over the life of your mortgage.
Corrina Del Toro and Sakata Ranglin, both Lennar Mortgage loan credit specialists, help clients every day get their credit in top shape for home buying. Here are their best credit wisdom and tips for boosting your score.
Get an accurate picture of your credit score.
That means requesting a credit report from each of the three primary reporting credit bureaus—Equifax, Experian, and Transunion—as they report slightly differently and may pick up different items. Be warned, says Ranglin, about companies such as Credit Karma, which uses models from VantageScore and tend to calculate higher scores than banks and lenders, who will be using the primary three bureaus.
Every credit score is unique and requires a different strategy.
"Each customer is like a fingerprint, no two are the same," says Del Toro. "All of us here at Lennar Homebuyer Solutions Group can set up a plan, but it has to work for that exact customer. There is so much going into that credit score—how old is your credit record, how much credit do you have, how reliably do you pay down credit, what is your income. There's so much going into that score, so we rely on a highly personalized plan for our borrowers."
Know that credit impacts more than just a home loan.
It's not just about qualifying for a mortgage, Ranglin says. "Once you get in that home, it's going to impact things like extra fees for deposits and activation fees for utilities—everything we do as consumers. Even getting a job."
Understand the 3 main ways to improve your credit score.
Del Toro and Ranglin both agree that the path to better credit comes down to three major opportunities for improvement:
- Correcting missteps. Late payments, unpaid bills, or any errors need to be addressed, disputed, paid, or forgiven. Your mortgage loan credit specialist can help you strategize the best way to prioritize and handle these.
- Maintaining a healthy credit balance. Don't open up too many store credit cards, don't carry too large of a balance on your credit cards, and most importantly, don't max out or exceed your credit limits. "You'll pay heavily with your score," Del Toro says. "Going over the limit is particularly bad."
- Giving it time. Not all borrowers can afford to wait to close on their loan, but if you can wait 6 months or more, you'll have time to address issues such as paying down balances as well as creating a track record of positive credit behavior, such as paying above the minimums and paying on time, Ranglin explains.
Taking control of your personal credit is one of the most crucial and empowering financial moves you can make, whether you are in the market for a new home or just dreaming about it.