One of the most important parts of the home loan process is utilizing your credit score. Credit score is one of the primary factors that determines many of the vital financial details of a mortgage loan, and can often be the difference between you getting the mortgage rates you need and not doing so.
At Wasatch Peaks Credit Union, we’re dedicated to providing our clients all the knowledge and savvy they need to make the right personal, business and family financial decisions. We’ve seen firsthand the pitfalls of lackluster credit in the mortgage loan process, so what are some things you can do to make sure you aren’t suffering from a low credit score?
Keep diligent track of your spending habits, particularly your lines of credit – exactly how far these extend should be something you know, and do your best to never exceed these limits. Many financial experts suggest the “20/10” rule of thumb: Never let your credit card debt get higher than 20 percent of your yearly post-tax income, and never tie up more than 10 percent of your monthly income in credit card payments.
Keep Emergency Funds
Unexpected expenses are part of life, and if you’re forced to run these up on your credit card every time they happen, it could tank your credit score and impact your financial future. Keep a buffer of 10 to 15 percent of your available credit if possible, or even more if you can manage it. Try setting up a Budgeter Account to save money for an emergency fund. Many people try to keep several months’ worth of income saved up in case of emergency.
Staying organized prevents negative outcomes like missed payments or unnoticed spending limits. Keep track of your due dates in a comprehensive list you can easily access, and keep all your bills in one place.
You can schedule payments either online or in person with your credit union, and set up automatic payments. You’ll be thanking yourself down the line when your credit isn’t the thing keeping you from an affordable home loan.
Keep In Touch
Especially if you’re having any issues with credit card or other debt payments, keep an open line of dialogue with your lender. Lenders want the same result you do – their money back – and even if it often seems like you’re on opposite sides, they’ll generally work with you to restructure things if you’re falling behind.
Interested in learning more about mortgage loans, home refinance projects or any of our other services which may be directly impacted by credit score? Our financial advisors at Wasatch Peaks Credit Union are standing by.