Hot Takes with the Timberlakes: Credit Tips
There’s a lot that goes into buying a home! And while there’s no reason that you should be expected to know everything about the process, there are a few things in your power as the consumer that can give you the upper hand when it comes time to buy.
One of those things: Your credit.
Credit is a big factor that comes into play when getting a mortgage, so doing your best to optimize your scores can potentially end up saving you thousands (and thousands and thousands) of dollars. Here are some of the biggest credit factors and how you should approach them:
Credit history: having a history of on-time payments for your accounts is perhaps the biggest one. Obviously, you can’t go back in time and fix any mistakes from the past, but as you’re prioritizing for the future, making on-time payments is huge. If you find yourself trying to decide between making your car payment or buying a new TV, pretty please make the car payment. We’ll have you over for a movie marathon to tide you over until you can save up for that new 85-inch 8K QLED monstrosity.
Utilization ratio: pull this phrase out at a party if you want to immediately end a conversation, but it’s actually a very significant factor for your credit score. Your utilization ratio is your credit card balance versus your credit limit. While it may seem like an annoying/absurd concept (because it is), just know that it’s best to keep your credit card balances within 30% of your credit limit. Basically, creditors aren’t going to be stoked to lend to someone with 7 maxed out credit cards, so keeping balances low shows them that you’re responsible with credit.
Hard inquiries: people often worry about the hard pull that comes with applying for a mortgage (which is kinda funny, considering buying a house is the pinnacle of using credit for 99.9% of folks, and should be the whole reason you’re trying to optimize your scores). However, not all credit pulls are the same. Auto loans, credit cards, and unsecured lines of credit are theoretically much riskier forms of debt, so those pulls will have a more significant “ding” on your credit. If there’s such a thing as a “good” credit pull, it’s for a mortgage. What you need to know is that you generally should NOT apply for other kinds of debt when you’re getting ready to buy a house. And definitely don’t go apply for new debt when you’re under contract on a house because that can absolutely wreck the whole process.
There’s so much more to be said about credit, but I’m pretty sure I would lose our entire audience if I went over everything… just know that we’re here to talk about all of this! Even if you don’t think you’re going to buy a house for another two years, it’s never too early to think about how you can optimize your credit, so please reach out with any questions or concerns.
