The following is an article from Martin Dasko of Studenomics. Martin has just released a super-helpful guide that shows you how to completely conquer credit before you hit 30. You can’t leave a lasting legacy if you’re stuck spending today’s income on yesterday’s fun. You also can’t get that dream home without any credit.
You graduated from college, found a high-paying job, found the partner of your dreams, and now it’s time to buy that dream home.
You deserve a big hug.
You reached your goals and now you want to begin the rest of your life.
This isn’t for everyone but some of us want to get married early and start a family young. That’s cool. This article is for you. This is also for anyone who simply wants to build credit.
There are a few key credit related moves that you need to make just before you guys buy your first home.
I’m going to assume that you plan on applying for a home mortgage or possibly a car loan in the very near future. I also want to go ahead and assume that you have your money saved up and you know what you want – you just don’t know how to get there.
What credit moves should you make/avoid right before you apply for that big loan?
Pay Down Your Debt
Why would someone loan you more money if you still owe money?
The first thing that you want to do before you go ahead with home shopping is to see how much money you owe and figure out how you’ll pay this money back.
Buying a home is a huge decision. You don’t have to feel like it’s the next logical step in growing up. If you have lots of student or consumer debt you need to work on paying this down first.
Once you deal with this debt then you can worry about taking on more debt. You don’t have to rush into buying a home. It won’t hurt you guys if you take a few months or even a year to hustle and pay down your debt.
You’ll be glad that you did and you might even get to re-evaluate your goals as a couple.
Check Your Credit Report
You need to check your credit report, not just your credit score. You need to check your credit report to ensure that everything on it is accurate. You don’t want some inaccurate information to bring your credit score down.
Your credit report contains all of your important information. Your credit score is just the number that is derived from the report through some complex method that I’m too stupid to even fathom.
If you notice any major or minor issues it’s time for some credit repair. You need to dispute any issues that are bringing your credit score down. There have been instances where the same loan is counted twice or the bank has forgotten to record an improvement.
If you want to resolve any issues on your credit report it’s critical that you contact the bank that reported the inaccurate information. The reason for this is that the bank will report the same inaccurate information to the credit bureau every month. You want to repair the problem where it started.
What’s the point of fixing any issues on your credit report? You want the best credit score possible when you apply for a home mortgage. You don’t want a low score that will lead to a higher interest rate.
A low score means more money out of your pocket. You want a higher credit score so that you spend less of your hard earned money on interest.
Don’t Close Any Accounts
Closing an account usually has a negative impact on your credit score for the short-term. If you plan on applying for a home mortgage in the next few months it’s totally not advisable to close any accounts up.
The only time closing an account won’t impact you negatively is if you have no debt. If you do have debt this impacts your credit utilization ratio. You have less available credit with the same amount of debt. In summary, that’s not good.
In summary, if you follow these steps and wait it out a bit longer I promise you that you’ll be ready to apply for that home mortgage. I went through this process myself a few years ago and I’m glad I did. Are you ready to buy your first home?
Don’t forget to check out Completely Conquer Credit Before You Hit 30.