Credit Score Archives - Living Room Realty

As mortgage interest rates continue to fluctuate, many potential buyers are considering whether now—or the near future—is the right time to buy a home. If you’re thinking about making a move, laying the groundwork early is essential. One critical aspect of this preparation is building and maintaining a strong credit score, which plays a pivotal role in your ability to secure a mortgage.

The Importance of Creditworthiness
Credit scores are a key factor in determining not only whether you’re approved for a mortgage but also the interest rate you’re offered. A higher score can translate into significant savings over the life of your loan. According to the Consumer Financial Protection Bureau, “A higher credit score can lead to better mortgage rates, ultimately saving you thousands in interest over the life of a loan.” This underscores the direct impact creditworthiness has on affordability in today’s housing market.

What’s a Good Credit Score for a Mortgage?
Contrary to popular belief that you need a perfect score, most lenders consider a score in the “Good” range (670–739) to be a solid starting point. For the best rates, aim for the “Very Good” range (740–799). The Federal Reserve Bank of New York reports that the median credit score among mortgage applicants in the U.S. is around 770. High, but not perfect, scores are common.

Steps to Strengthen Your Credit Score
If your score could use some improvement, financial experts offer actionable steps:

Pay on Time: Payment history is the most significant factor influencing your score. Always prioritize on-time payments to prevent penalties.
Reduce Credit Utilization: Aim to keep your credit card balances below 30% of their limits. Lower utilization rates indicate better financial management.
Limit New Credit Applications: Too many hard inquiries can temporarily lower your score, so only apply for credit when necessary (source)

Consulting a Lender
Mortgage brokers and lenders often use tools like FICO scores but apply unique criteria to assess risk. As FICO clarifies:

“Each lender has its own strategy, including acceptable risk levels and scoring criteria, which means there’s no universal cutoff score.”

As you start planning for homeownership, a good foundational step is to understand your credit score and how you can improve it. Speaking with a knowledgeable mortgage broker who is willing to help you understand all of the factors, including your credit score, and how they influence your options, rates and monthly payment is pivotal. If you’re looking for help or advice; don’t hesitate to reach out to me: kelsey@livingroomre.com | @kcb_portland.

Steps towards establishing Good Credit Condition even in case of No Credit or Bad Credit Score

1. Analyze Your Credit Report

This involves two processes: Pulling your credit report and analyzing

a) Pulling Your Credit Report

The first priority thing you need to do is to pull your credit report in order to analyze your current credit situation. A great free resource is CreditKarma.com and for an annual free and official version use this federal site. I recommend doing both and comparing. The federal one is most accurate but you can only do it once a year.

Pay close attention to the major bad credits and dues.

Many people do not acknowledge their bad credit, thinking that it will somehow go away. But that is not a good strategy.

You have to face those bad credits head on in order to overcome them.

b) Determine if you can overcome your situation

You have to be honest with yourself while analyzing this situation. You can easily overcome small dues but big credit areas require a different strategy.

If for example, can you honestly pay $200,000 that is due in medical bills?

You need to realize these things; Are your finances that strong? Are you about to gather a large sum of money that will meet this expense?

Among many alternative options bankruptcy may be the last alternative for you.

Only after proper and honest analysis, plans can be made and implemented.

2. The Strong Motivator

Be clear of your big “WHY?” Factor.

You have to have a strong and logical yet emotional motivation.

Write it down and put it somewhere that is in front of you daily. Let it remind you and keep you motivated.

3. Evaluate Your Various Sources of Finances

After analyzing your credit report, then you need to evaluate your various sources of finances.

Find out where you’re spending your money. Also find out how can you make additional income. A great free resources is using Mint.com to track your spending. You can create categories of spending to see what are needs and wants. I recommend looking 3 months back and labeling all transactions to identify your spending habits. See what you can eliminate going forward.

a) Check on Expenses

What are those things that you are wasting money on unnecessarily?

You can not neglect your basic necessities, but what are the over the top expenses. “Find the holes in your purse.”

Some people spend tons of money on fast food, online shopping, excess credit card charges, and on multiple online program subscriptions.

Similarly identify your major expenses and create a budget for max spending each month on these items to limit your losses.

b) Creating Additional Income

By cutting the unnecessary expenses, some additional savings can be made.

Instead of going out for fast food multiple times, you can limit it to once or twice a month. Instead of multiple subscriptions you can limit it to one like Amazon Prime alone.

Turn off the subscription packs for alerts from various e-business shopping websites. Being prompt with credit card payment is also a must.

Selling unused goods can give additional income once in a while. Also evaluate if it’s worth picking up a side hussle or second part time job.

It requires strong discipline in managing finances.

4. Just Do It

Take action now. Don’t wait for next year.

After the evaluation and proper planning, with a strong motivator backing you, and with a little reward; All you now need is to, just go get it.

Follow your plan, track your success, and watch yourself earn an amazing credit score.

Have a positive mindset while taking action.

One method to keep things rolling is to start with small debts and paying those off first, then move onto the bigger ones. With a sense of accomplishment, you can conquer more. Another method is paying down the highest interest rate credits first while paying the minimums on other cards. This is the best financially but sometimes it is not motivating if the largest interest rates are also the largest sums.

Consider consolidating your credit card debts with a 0% APR credit card like Double Cash. Check for when the rates will increase on the card and create a payment plan schedule to pay off the combined debt before the rate adjusts.

5. Reward Yourself

Set small goals and Reward yourself on achieving them.

For example, after de-cluttering and selling off unused stuffs give yourself small coffee or small snacks gifts that satisfies you.

Do what ever makes you feel good without building up more debt.

6. Serve the needy

In addition, find an avenue to give. It enriches life.

It is sowing seeds of goodness that will bear fruits in future.

Apart from money; your time, your skills and talents can also be of value to others.

Serving others nourishes your soul and makes you feel good about yourself. A simple way to help is to share this article with others so they can get their credit in line as well.

Conclusion

It takes time and efforts to increase your credit score drastically. It will not be easy.

But with proper analyzing and planning, combined with strong motivation and discipline one can achieve this goal.

Remember that you will get the best deals—once your credit scores increase.

Melissa Dorman is a Oregon and Washington Licensed Broker with Yascha Group at Living Room Realty in Portland, OR. Follow Yascha Group on Facebook.

Tag: Credit Score

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