My San Antonio
Buying a house is one main goal of every individual. It could either be having your own home or making money from it by renting it out to other people.
But the question is, how are you going to buy one?
No ordinary person can buy a home in cash. Especially if you’re earning enough to sustain your and your family’s basic needs.
That’s why many professionals are buying a house through credit. This is not new to us. We all use credit if we don’t have any cash available. Great help, right?
But many are asking, will buying a house affect credit score?
Here, we are going to discuss how a credit score is affected by buying a house through credit.
Mortgage and Your Credit Score
Technically, if you apply for a personal loan or a home loan, it will have some negative short-term effects on your credit score.
It’s part of the lender’s responsibility to check the credit history of the applicant. When it comes to mortgage, the lenders usually pull the credit. This is part of deciding whether you are a good candidate for a home loan, or not
“Pull the credit” is referred to as a ‘hard’ credit inquiry. With this method, it will drop a few points in your credit score.
Yet, there is a way that you can protect your credit score from serious drop points. You can shop for your mortgage in a 30-day window. There will still be a subsequent credit pull in doing this as their hard inquiry. But, the credit bureaus count only the several cash loan applications.
To make it clear, there is still a “small” drop in your score. But don’t worry because, with this kind of strategy, it will help you minimize losing big points.
How will a mortgage affect your credit?
It is very important to know the basics. Remember, credit reports speak of your ability to pay your debts. It is essential to make your debt record proportionate to your income. This is called your “debt-to-income” ratio. Luckily, there are services like Smart Credit dispute credit report that could help with any discrepancies.
Bear in mind that if you have plans to buy a home soon, you should not take other debt obligations. Because if you do, it will cause your debt-to-income ratio to increase.
You must keep it not more than 36%. It is already considered as optimum in which no more than 28% goes to your mortgage.
We use credit most of the time. But the best tip is as you continue to build your credit history, keep your debt-to-income ratio low. It is better to have a little credit than no credit as far as your credit score is concerned.
How to make your credit score back in good standing?
There’s one reason why some people experience a big drop in credit score. It is by not paying the debt on time.
There’s a lot of reasons why there are some people who can’t pay the debt on time. But mostly, the reasons are first, they are not willing to sacrifice. We lived in this world as if we should live life with everything we want to have. And that makes sacrificing very hard to do.
If you don’t want to be burdened by debts, you have to sacrifice so that debts will get out of your life. Remember, credit is a privilege. But you have to pay for it.
Secondly, due to many debts – well, people tend to have multiple debts – you don’t know where to start. That’s why some of your debts aren’t paid. Cause you are now confused, then suddenly, you shut down and give up!
People who are uneducated about financial literacy will experience this kind of dilemma.
Some people get scared. The fear of not paying off debts. And what they usually do is to run from it instead of thinking how to pay all the debts.
You know, all these reasons will help you ruin your credit score. So if you don’t want to mess up your credit history, you’ve got to pay your debts, ON TIME!
We do all have personal reasons or different situations. But in the case of having credit, you have to sacrifice some things for you to pay the debt. We face challenges in our finances. But if we find ways to solve it, it will be easier and faster to get out of debt.
So if you are going to buy a house, prepare your credit score for some drop points. It’s just temporary. This will happen if you’re going to pick up a new credit account. After that initial drop, it will likely increase your credit score. As long as you pay debts on time, you will see the increase. Put it into practice.
