David is onto step THREE in his series that shows you how to buy a home. Credit scores can feel overwhelming and David gets it: yes, they can be hard to navigate. Thankfully, David is going to tell-all in this latest episode where he talks ALL things credit so you are armed and dangerous when it comes to prepping to buy your first home.
Here are some power takeaways from today’s conversation:
- When you should start working on your credit score
- The importance of time
- FICO vs. Credit Karma vs. other apps
- Where your credit score comes from
[04:44] Don’t Rush It
The most important thing you need to know about building your credit score is that it takes time. We’re at the mercy of the financial system and we can’t change it, so there’s no point in getting all anarchal about it. It’s how it is. BUT, we can learn how to beat the system so we can use these systems to our advantage and still get the best deal. The key to it all? Being patient, especially if you or your partner are starting with a lower score. And remember, it’s not fun, it’s not sexy, but it’s very rewarding, so find a way to celebrate when you’ve built it up to your goal!
[18:44] Hard Pull vs. Soft Pull
The only way that you can get a full approval for a loan is to get a hard credit pull, which does give your credit score a hit. While you might have been warned to avoid this from other people, you have to remember that they need to pull your credit score for a full approval and if you don’t get this done it’s possible you could even lose the home. But, if you’re early in the process, you can get your credit pulled and then have time to build up your score again. Having the right team means that they can guide you through this process and make sure that you are on the right track.
[30:54] What Happens When Your Score Looks Rough
When you’re qualifying together, sometimes you’ll need both incomes to buy a home. However, it’s not an average that they use - they use the lowest the mid score. So, if your credit is 800 and their score is 620, well, they’re going to use the 620 score. But, there are some ways that you can boost a bad credit score and jump even a tier or two. According to credit pros, exceptional scores are 800 to 850, very good scores are 740 to 799, good scores are 670 to 739, fair is 580 to 669, and anything lower is not so hot. If you want to jump a tier, then you can do some things such as strategically managing your debt, asking for more credit, getting credit for paying rent, and dealing with your negative marks first.