It cannot be overstated how important it is to have good credit when buying a home in Berks County. Sure, you can technically buy a home with less than perfect credit, or even with bad credit. For example, an FHA loan asks for a minimum down payment of 3.5%. FHA guidelines require a minimum credit score of 580. With a down payment of 10% or more, FHA score requirements fall all the way down to 500. But you will pay for it in the end with higher mortgage payments. So the goal needs to be to get your credit in as strong as shape as possible before you buy a home in Berks County.
What are some ways to get your credit in better shape? You can really make an impact on your credit in just a few months if you follow these 4 tips.
Make Your Payments on Time
Not to insult your intelligence, but this first step cannot be overstated. Does that mean you have to make your credit card and loan payments all on the exact due date or before? Not at all. As long as you make your payments within a 30 days of the due date, you'll be fine. So if an account has a due date of the 1st, and you pay it on the 15th, it won't be counted as late on your credit. You may have to pay late fees, so make sure to pay attention to those.
Keep a Balance on Credit Lines
You might think that having a zero balance on your credit lines is the way to go. But the opposite is true. If you keep your balance at about one-third of your credit line and make timely payments, this can improve your score. Without a balance, no payments are being made. Making timely payments accounts for 35% of your credit score, which has a huge impact on your credit.
Pay Attention to How Many Accounts You Have
Most lenders will want you to have at least three credit accounts on your credit report. If you are at that number already, don't apply for more credit. A few initial inquiries for credit won’t hurt your scores, but multiple requests over an extended period of time will.
Rebuild Damaged Credit
If you have damaged credit, you should get a secured credit card. You can also try to get a credit card from a credit card company that caters to those with bad credit. The idea is to start rebuilding credit by paying on time and keeping your balances in check.
With a secured card, you pay a fee as a security deposit that's equal to the credit limit. Yes, it's like spending money you already have. But these payments are reported to credit bureaus just like a normal credit card or other loans. With timely payments, your scores will begin to rise to levels that work for most mortgage programs.
Make timely payments, keep balances around one-third of credit lines, keep credit inquiries to a minimum and for those needing to rebuild scores, seek out a secured card. Sometimes people who have poor credit don’t know where or how to start rebuilding. These four tips will jump start that process.
Make sure to visit to our blog every week for more real estate advice, along with local Berks County articles. Need help finding the perfect home for sale in Berks County? Our powerful home search tool will help you find the home of your dreams.