Secure Lower Interest Rates On Your Next New Home

Buying a new home is a serious investment that will likely require a bank loan. At Crescent Homes, we recommend two preferred lenders in Charleston, Ameris Bank and Regions. Besides being familiar with our Charleston sales team and closing coordinator, these local lenders support our preferred financial programs and can offer competitive rates assuming you have a decent credit score.

As you begin to discuss financing and seek approval for a loan, a high credit score will help secure lower interest rates. The best rates are reserved for those with a credit score of 740 or higher, and you will likely need to have at least a 620 score to be eligible for most new home loans in Charleston.

Hoping to buy a home in the near future? Here are five ways to improve your credit score.

1. Pay Off Low Balances
Do you have credit card debt? This could be affecting your credit score and hurting your chances to secure a lower rate on mortgage financing for that new home. It is actually better to have one credit card with a higher balance than several credit cards with low balances. Consolidating your debt can improve your score.

If you’re already late on a payment, call your credit card or bank directly and ask if they can forgive a late payment without charging a late fee. Credit card companies are fairly forgiving and will often waive the fee if you have a history of timely payments (or a good excuse!).

If you are in the market for a new home, consider paying off all low balance credit cards. But also…

2. Keep Balances Below 30%
30 is the secret number when it comes to balance to limit ratio on your credit card. Ideally, you want a credit limit high enough that you stay below 30% of its limit each month. That means if your credit card limit is $1000, your monthly statement should be $300 or less.

Even if you pay off your entire balance before the due date, having a balance that’s over 30% of the limit on your monthly statement can hurt your credit score. Unfair, yes, but also true. It may make sense for you to pay your balance early so that your statement reflects a lower ratio. If you find that you are constantly going over the 30% mark, call your credit card and request a higher limit.

3. Schedule Bill Pay
Banks love consistency. If you are trying to raise your credit score in order to secure financing for a new home, be reliable and pay your bills -all of them- on time. Avoid missed deadlines. A late payment will often incur a fee and could increase your interest rate (assuming the late payment is on a credit card balance). It’s a slippery slope from there to more missed payments and higher fees. Once a payment is 30 days past due, all three of the major credit bureaus are notified and your credit score will likely drop. A late payment could stay on your credit report for 7 years! Schedule Bill Pay through your bank or sign up for auto draft billing to ensure your bills are paid the same date every month.

4. Open a Credit Card
To have good credit, you’ll need to establish credit in the first place. Even if you pay your bills on time, having a credit card will help your credit score. But be wise in the card you chose. If you have decent credit already or know you will pay off your balance each month, don’t worry about interest rates and instead seek out cards with valuable benefits and high sign-up bonuses.

If you have bad credit or are known to carry a balance, look instead for the lowest interest rates or 0% APR promotional financing. If your credit is so bad that you’re not eligible for a credit card, you can apply for a secured credit card, which means you put down the deposit for the line of credit. So you put down $500, and can then spend up to $500 on the credit card. Pointless? Not if you need to establish some good credit!

Do your research first and only apply for the card you want as multiple applications (or multiple balances) could lower your credit score.

5. Check Your Credit Report
Finally, check your credit report for errors. 1 in 4 credit reports contain an error that’s directly affecting the credit score. Under the Fair Credit Reporting Act, everyone is eligible for one free copy of their credit report annually from the top three major credit reporting agencies, Equifax, Experian and TransUnion. You can access these through AnnualCreditReport.com.

Confirm that your personal information is accurate and that all of your credit accounts are being properly reported. Look for false claims of missed or late payments, accounts or cards you did not authorize or old items that should have been expunged. If you find an error or item that should no longer be on the report, dispute it with all three credit bureaus.

In truth, everyone should work hard to raise their credit score. Whether you are in the market for a new home in Charleston today or think home-ownership could be in your distant future, take the necessary steps now to improve your credit score.

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