With home prices in 2013 expected to rise drastically, buying a new home sooner can save you a lot in the long run. For those of us with less than perfect credit, here are 5 steps to building your credit to buy a new home.
1) Pay all past due items and file disputes for any errors.
Keeping up with your credit report is one of the most important things you can do as a home buyer. Many buyers do not check their credit, only to find many errors and past due items that hurt them in the long run. Investing a little time now, can save you a lot of time later.
2) Develop a strong rental history.
Pay your rent on time each month using a personal check, credit, or debit card. Be sure that you always have a record of payment that is reflected in your credit report.
3) Get 3 major credit cards.
Apply for a Visa, Mastercard, or AMEX card and use them for your monthly expenses that you would normally use cash for. Apply for a card that offers cash back rewards or flyer miles so there is more incentive for using the cards. Be sure to set aside your cash each month, and pay the bills on time to build your credit score.
4) Use less than 30% of your credit limits.
By using less than 30% of your limit you avoid overextending yourself each month, which is scored negatively by credit models.
5) Deposit a monthly ration into your savings consistently.
Develop a habit of setting aside money each month as if it were for your mortgage payment. This will help you to understand what a reasonable payment will be for a home, and will help you to make adjustments in your budget later.
By following these simple steps, one can build or rebound a dying credit score in a matter of 12-24 months just by slightly adjusting their lifestyle spending.