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Obtaining a mortgage can be one of the most rewarding experiences in a person's life. The ability to purchase your first home is an exciting time and a big move for your entire family. However, not everyone will qualify for a mortgage. One of the reasons is that you might not have enough credit built up yet to qualify. Here are four ways that you can build up your credit and improve your position for mortgage qualification.
1. Get a Credit Card
While many people believe that credit cards are a bad thing, they can actually be beneficial in certain situations. If you learn to use them properly, they can be a great asset in building your credit. Apply for a credit card that has the benefits that you want and use it. Put a few purchases on the card and then pay the bill. Your ability to handle a credit card for an extended period of time will go a long way in building up your credit score.
2. Pay Your Bills on Time
Paying your bills on time is the single most important factor when it comes to building your credit. If you have a credit card, you will want to make sure that you at least make the minimum payment each month. Making your payment on time determines up to 35% of your credit score. Therefore, it is a simple way to boost your score. If you constantly miss payments or make late payments, you will not be able to build your score up enough to qualify for a mortgage.
3. Keep Balances Low
When you have a credit card, you should not always max the card out to your limit. If you always have a maxed out card, this shows the credit bureaus that you do not know how to handle your money. Try to keep your balance at about 30% of the credit limit or less. When you have available credit and do not spend it, you are showing the credit bureaus that you have restraint. You can resist the temptation of immediate gratification if you do not have the money. Credit bureaus like this trait in you and boost your credit score as a result.
4. Get a Good Credit Mix
In order to boost your credit score, it is a good idea to get a good mix of credit. Credit bureaus like to see that you have a few different kinds of credit attached to your name. If you have six credit cards but that is the only type of credit that you have, it may not be good for your score. They like to see a credit card, an auto loan, a student loan, or even a store account. This will show that you know how to handle your money in different areas.
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