Nowadays, you can buy anything through the help of credit cards. From small products such as bottles, food, appliances, to big things such as cars, houses, and much more. But there are many people who do not have the necessary balance to put them in a place to buy a house or a vehicle in one go—they need an easier plan and that plan comes to them in the form of mortgages.
There are many people that have no knowledge of how important credit score is when you are going to buy something on a mortgage. The person, in this case a mortgage buyer specifically will look for your credit score and see if you can be someone that can pay the mortgage all around the year, for several years depending upon other factors such as what vehicle you are buying or how large of a house you are going for.
If your credit score when it comes to getting a mortgage plan is low, then you won’t be able to get a mortgage plan for anything.
Therefore, here are a few things you can do and should know about your mortgage credit score.
Why is your mortgage credit score important?
Firstly, mortgage credit score is very important, mainly because it can determine the following:
- It determines the type of house you can buy.
- It determines the interest rate of the mortgage.
- It determines what kind of loan programs you can opt for.
Therefore, all these things are depending on your credit score. For example, if you are low on credit score, then it can greatly affect the way you can buy a house. Therefore, it is recommended to look at your credit score, see if its utilization ratio is in between the 20%-30% mark. It is always a smart move to look at your credit score before opting for any kind of mortgage.
What to do if credit score is low?
When mortgage credit score is low, one has no choice but to increase their credit score in order to get the mortgage plan. There are certain things one can do to increase their credit ratio, they are the following:
- Increase your credit card limit. This method is highly beneficial because once the credit card limit ratio is increased you can easily stay within the perfect utilization ratio of credit cards, which is around 20%-30%, and somewhere near it. For example, 33% credit limit of $100,000 will be $33,000—this is the amount you can spend and is your actual credit limit if you want to increase your credit score to help you attain a mortgage plan.
- Use your credit card more. The more you use your credit card within the hypothetical credit card limit which is around 30%, you can increase your credit score, gradually.
- Pay before due date. If one is careful with their bills and pays them through credit card on time, or through automated payments, then one can increase their credit score and repair their mortgage credit score as well, which will make them eligible for the mortgage they want.