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Do you wish you knew how to improve your credit score in order to buy a house? Well today, I have a very special guest with me, Jarad Brown from Certainty Home Loans, and we are starting right now.
Hey, everyone. Welcome back to my channel. I’m Karin Carr, a Realtor in Savannah, Georgia, with Keller Williams. If this is your first time here, and you’re interested in all things real estate related in the Savannah area, go ahead and subscribe, because the information you get here is pretty awesome, and I know you don’t want to miss anything.
So, I am so excited to have Jarad Brown back with me. You may remember that we did a video once before talking about the preapproval process and how to get a loan. And if you’re interested in that, just click right up here, and you can watch that video. So, welcome. Thanks for coming back.
Well thank you for having me back out again.
Yeah, absolutely. So, I thought today we would talk about how you can improve your credit score, and why that’s a big deal when you’re going for a home loan.
Very, very important stuff. As a lender, we look at three main things. We look at your ability to repay, which is your income and your liabilities. Then we look at your worthiness, your credit worthiness, which is your score. Unfortunately, the score says a lot about how you have managed credit. And then we look at how both of those things play going forward, both your income and your credit score. So, your credit score’s a big piece of whether you qualify or not. A lot rides on that number.
And if they have a lower credit score, does that affect how much they’ll be able to borrow?
Absolutely, the lower their score, the more of a credit risk they are. So, we’re going to be less likely to lend larger amounts of money to that borrower. So, a borrower that comes in with a lower credit score around 620’s, we won’t take their debt to income ratio as high as we would if somebody came in with a 780, 800.
So, if they have a better credit score then, they’re going to be able to borrow more money and get a nicer house in a better neighborhood.
Yes, they can borrow more money and at more affordable rate. The better your credit score, the more affordable the house is going to be to you, the more likely you are going to be to pay that on time, and then further increase your credit score.
So, why don’t you give us a couple of actual tips that people can take to raise their credit score, you know, in the next six months.
I would say, for the first-time home buyer who’s just now establishing credit for the first time, one of the best things you can do to grow that credit, is to use that credit. So, if you’re old-school spending cash on things, which is a great way to go … but whenever you want to borrow money, you kind of have to have that established, like hey, I’m trustworthy. I borrow money, I use credit, and I use it responsibly.
So for that person who’s trying to set up their credit for the first time, I highly recommend getting a credit card and use it on gasoline purchases. Gasoline is something that you’re not going to go out and buy more gas because you have a credit card. Or you’re not going to go out and buy nicer gas, ’cause you got a credit card. And it’s something you’re already spending money on anyway. You have to buy gasoline to get to work, to take your kids to school, whatever that is. So, it’s an expense that you’re already incurring. So, get that credit card and just know, whenever you go to pay at the pump, use your card. At the end of the month, pay that off in full.
Yeah, I would tell anybody who doesn’t currently utilize a revolving credit card, get one. Maybe not a Banana Republic one, but one that you can use for gasoline purchases, use it for gasoline purchases only, show that you have the responsibility, pay it off, and you’ll reap the benefits on your score. Absolutely.
All right, that’s a good idea.
And then, of course, we have borrowers that come across that have a long history of credit, and of history that might not be great. But there is hope for those borrowers, too. Those are the ones that we usually see. They’re scared to have their credit pulled, because they’re afraid that it’s going to hurt their credit having that hard pull on their score. But I liken it to going to the doctor, right? So, you know that you have an issue with credit. You’ve told me, “Hey Jarad, I kind of have an issue with credit.” Be it a divorce or loss of job, or just something that has affected your score. Just like an illness, you need to go to the doctor and see, where do I stand.
So, I highly recommend getting in touch with a lender, having them pull that. If it’s going to affect your score, it’s going to be a couple of points, it’s not going to put you to where you can’t buy, or it’s not going to hurt itself. And the gain from that, from having your credit pulled, if you have it done with a local lender, they will pull your credit. They’ll go over ways that you can increase your score. Sometimes it’s as little as paying down some debt, using some of that tax refund to pay down a credit card that’s been maxed out for the last two years. It might be that easy to get from a 620 to a 670.
Then you have some clients that it’s going to take a while, you know? Some people it might take six months or a year to get their credit right. But if you never have your credit pulled out of fear, and never look, you never start that one year clock.
And no matter what your credit score is, you’re never that far off from buying a house. And if you never start working on the credit, it will never get to where you want it to go.
So, if somebody starts making these sort of improvements, how long do you think it would take before they’d see a big change?
Well, with every client it’s going to be different. We’ve seen clients turn their credit around in a matter of a month. Some clients, as I said, take a little bit longer. But the important thing to know is, if you’re currently renting, which most people who have credit issues currently rent, before you sign that next lease, you need to know what your timeline is. Right? So, you could think, hey, I’m probably six months out before I could get my credit in the right place. My lease runs up in two months, I just need to go in and re-sign my lease and be stuck in this apartment for another year. Maybe not. Go in and call a lender, get that credit application on so that we can tell you, “Okay, we can wrap this up in a matter of a month. Do you have $500 to pay down on your Target card?” “Yeah.” “Cool, I can have you eligible to buy a home in a month. And I’ve just saved you from one year worth of renting.”
Or it could be, “This is going to take us one year to do. Why don’t you go ahead and renew that lease at this apartment, and by the time that lease comes up, we will have you out home shopping to make sure that this is your last year wasting money on rent.”
So, now you know how to improve your credit score, but what if you have no credit history whatsoever?
Absolutely, well, as we just discussed, we want to establish credit and get that going, but for some buyers, especially millennials, people coming straight out of college that have been using cash, if you have no credit score, there are programs even for you right now that we can get you into, that uses non-traditional credit qualifiers to get you into your first-time home.
It’s never too early to sit in front of a lender and see what your options are, see what’s available to you, and make that financial plan. So that, whenever it comes time for you to fall in love with a house, you know confidently that you can go out there and put an offer on it and get it.
Jarad has a one-page PDF download all about this program for people with no credit history. So, if you want to get a copy of that, just click this link right up here, and you can go ahead and download it directly from my site.
Thank you so much for watching. If you like this video, be sure to hit the thumbs-up button, leave a comment down below, share it with a friend, and consider subscribing to my channel. I post new videos just like this every Monday, and you don’t want to miss anything. Thanks again for watching, and we’ll see you next week.
Thank you so much for watching. Let me do that one more time.
Do you wish that you can …
Okay, that’s not bad. Not great.
And … brain cramp.
Cool. All right, I think that was plenty.
About the Author: The article above, How to Improve your Credit Score, was provided by Karin Carr, an authority on Savannah area real estate and a leader in the field of real estate blogging and vlogging. Karin has helped literally helped hundreds of families buy and sell homes since 2005.
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