Building Up Your Credit

If you are getting ready to buy a Hawaii house in the next few years, taking time to build your credit is a great way to get the best rates and keep your costs down. Here are a few steps that you can take today to get your credit in the best shape possible.

Three Tips for Building Your Credit

1) Make Payments On Time

It seems like a simple step but it is one of the most critical to building and maintaining good credit. If you make your payments on time, your lender knows that they are likely to get their monthly mortgage payments on time as well. If you struggle to remember to make your payments, you can always set up an autopay or auto-draft with your bank. This makes it easy to keep those payments going where they need to go when they need to go there.

2) Reduce Debts

One of the most important things that you need to consider is your debt-to-income ratio, DTI. Lenders look at this ratio to see how much money you need to pay out monthly to cover your debts compared to how much money you have coming in as income. Debt from credit cards, car loans, student loans, medical debt, and other sources can take up a big portion of your budget. Try to make extra payments whenever possible to get these debts out of your life.

3) Getting Credit

One of the biggest problems that younger home buyers have is that they don’t have a long credit history. While there is no substitute for time, keeping lines of credit open (even if you don’t use them) can show that you have a long history with a certain bank or financial institution. Just be wary of opening new lines of credit that you don’t need. Not only does this make things more complicated, it can also be tempting to spend money and build up debt.