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Looking to buy a Boston Seaport condo? Credit scores play a big part

In today’s market, nearly every lender in the country is requiring a minimum credit score of 620 or higher. Unfortunately, this eliminates nearly one-third of potential homebuyers according to Zillow. The other two-thirds of buyers may qualify for a loan but will need a score above 740 to get the best rates. If your score falls between 620 and 740, there will most likely be an adjustment to your rate, or you could possibly miss out on credit that you would have otherwise received. 

If you are below 620 or just below 740, here are a few things you can do to raise your score while looking for a Boston Seaport condo for sale:

Pay your bills on time-

 Sounds simple, but one recent late payment can drop your score significantly.

Keep your debt ratios low- 

If your credit limit on your credit card vs. your balance is too high, you can lose significant points. I have seen 30 points or more for a single credit card. Never have your credit cards maxed out when trying to buy a Boston Seaport condo

Opening up new credit- 

If you open up a new credit card or buy a car, this can negatively impact your score as well. Generally speaking it is not a good idea to open anything when getting ready to buy a Boston condo for sale or during the process. There are some circumstances where one may have little to no credit where opening up a new credit card can be positive for your score. You would want to consult an expert in this case.

Don’t close your credit card accounts-

Generally speaking, it is not a good idea to close a credit card that you are no longer using. If you do so, you could potentially eliminate a positive piece of credit from your score which can significantly drop your score. Every credit report and situation is different, so make sure that you get professional help before making changes to your credit profile.

Boston Real Estate Blog Updated 2021

If you are in the market for a new house, you may be overlooking one key to your success: your credit score.

That three-digit number has a direct impact on your ability to get a mortgage and what interest rate you will pay.

Mortgage rates are at two-month lows, with the benchmark 30-year fixed loan at 3.11%, according to Bankrate. On Wednesday, the Federal Reserve announced it will continue to keep short-term interest rates near zero, which means mortgage rates should stay low.

To get that low rate though, you’ll have to have a good credit score.

“Even a quarter-point or half-point can make a really big difference over the long haul on a large loan amount,” said Ted Rossman, senior industry analyst at Bankrate and CreditCards.com.

Credit scores range between 300 and 850. A good score is between 670 and 739, very good is from 740 to 799, and 800 and up is considered excellent, according to FICO, a leading credit-scoring company.

Homebuyers who took out mortgages in the fourth quarter of 2020 had a median score of 786, according to the Federal Reserve Bank of New York.

If you don’t measure up, it doesn’t necessarily mean you are shut out of the market. There are several moves you can make to improve your score.

First, check your credit history

You are allowed one free credit report a year from the three main credit-scoring companies: Experian, Equifax and TransUnion. You can reach out to each directly or you can access them through annualcreditreport.com.

Not only should you know your score, but you should also make sure there are no mistakes or unintended skeletons in your closet, like a missed payment you forgot about.

Pulling your report before you apply for a mortgage or pre-approval, ideally a few months in advance, will give you time to correct any issues.

Pay bills on time

Late or missed payments can knock down your score.

The easiest way to avoid that is to set up automated payments for your bills, said Faron Daugs, founder and CEO of Harrison Wallace Financial Group.

Lower your credit utilization ratio

Lenders will look at whether you have high balances on credit cards.

Even if you pay your credit card bills in full each month, you may still have a high utilization rate, Rossman pointed out.

For example, if you make $3,000 in purchases and have a $5,000 limit, you are using 60% of your available credit. Try to keep it below 30%, Rossman said. Those with the best credit scores keep it below 10%.

Making an extra payment in the middle of the billing cycle can help knock the balance down before the statement comes out.

Become an authorized user on someone’s credit card

If you have no credit, one of the best ways to start building it is becoming an authorized user on someone else’s card.

Don’t rock the boat

If you are looking to purchase a home, hold off on any other big-ticket items, like a car. Also, don’t open or close any credit cards until after the mortgage is approved, Rossman suggested.

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