5 Tips For Self-Employed First-Time Home Buyers
Posted by Eric Skates on
Being self-employed isn't easy, especially when it's time to get a home. If you're a first time buyer, though, something to keep in mind is that your credit score can be the key that opens the doors to better opportunity in your life.
Which is why it's important to make sure that number is as high as you can possibly make it before you start home shopping.
If you're not sure how to boost your credit, don't worry, it's easy. It won't happen overnight, but if you do a few, simple things (and do them regularly) then your credit score will start climbing in no time.
Tip #1: Pay Your Bills On Time
This one sounds obvious, and it is, but it has an outsize impact on your credit score. According to Prevent Loan Scams, your reliability in paying your bills makes up 35 percent of your credit score! So the next time you get your utility bill, your phone bill, etc., don't wait to mail off a check; pay them promptly. Or, if you want to take the guess work out of paying your bills, set up automatic payment. This way you don't have to think about it, and a forgetful month won't undo any of your effort.
Tip #2: Pay Down Your Debt
Again, no one out there is reluctant to give up their debt. If you could wave your hand and be debt free, you probably would. However, as My Fico points out, paying off debt can go a long way toward improving your credit score. That's why it's a good idea to set your sights on the smaller debts you have, and to pay them off before working on bigger debts; the more progress you make, the better you'll look. On paper, that is.
Tip #3: Diversify Your Credit Lines
This one is a little more advanced, but it's good for folks who want to juice their credit score. Another good way to increase your credit score is to have multiple lines of credit active at once, according to Credit Karma. Because while having just a student loan, or just a credit card, or just an installment loan for your car or home is fine, if you can combine different types of credit then that makes your score go up.
But don't take out a loan you don't need just to boost your score. That is not worth the cost.
Tip #4: Leave Old Debt On Your Report
To be clear, this doesn't mean to skip payments, or hang onto debt that you have. What this means is that when you pay off a loan, don't immediately make a phone call trying to get it taken off your credit report. Let it sit there for a while, like a trophy showing that you managed to successfully pay off that loan. It reflects well on you, and it will be taken off your report in time. There's no need to rush it out the door.
Tip #5: Raise Your Credit Limit
One of the things that your score is based on is your credit utilization; the less wiggle room you have, the lower your score. So, for example, say you had a $2,500 limit on your credit card, and you maxed it out. That's not a good look for you, and it will reflect badly on your credit score. But say you called the company, and raised your credit limit to $5,000 on that card. Well, you just went from 100 percent utilization, to only 50 percent utilization. So even though you owe the same amount, you look better because you have unused credit you could flex into, if necessary.
We hope these tips help you get ready for your home purchase! If you're ready to figure out what loan program works best for your needs, find a local Mortgage Loan Originator here or start the pre-qualification process here