If your future plans include seeking out a mortgage loan and becoming a homeowner, having good credit is vital. Mortgage lenders will look at your credit score and report for proof that you’ll be responsible for repaying a loan. With a good score, your loan might come with advantageous terms and rates. Follow these tips to start working toward good credit today.

How to Establish Good Credit 

1. Charge What You Can Afford

Once you’ve opened a credit card, it’s easy to start buying items that are out of your budget, but when the bill comes around, you’ll be in for an unpleasant surprise. Create a plan as to which purchase you’ll charge to your card. For example, maybe you charge monthly groceries or another predictable and fairly consistent expense that’s easy to budget for, which will help you avoid excessive debt.

2. Pay Bills On Time & In Full

If you’re careful about only charging what you can afford, it will be easy to pay your credit card bill in full each month. Mortgage lenders will see this as a sign that you’ll also be able to pay your monthly payments to them. Further, your credit score is largely based on how timely you are in making payments, so paying on time is an easy way to increase your score. 

Although your monthly payments won't show up on your credit report, accounts that are past due will show up on your report. Even if you can't pay in full, paying more than the minimum each month might be the difference between delinquency and good credit.

3. Age Accounts & Increase Limit

The longer you have credit, the more confident mortgage lenders will feel in the proof that you’re a responsible borrower. So, even if you feel like you’ve grown out of those first credit cards, keep them around to solidify your borrowing power. Typically, several years after you’ve closed an account, it will be removed from your credit report.

In addition to aging cards, you should consider increasing your limit once you’ve proven that you can maintain a utilization ratio—the amount of credit available vs. the amount you’re using—of 30% or less. The lower you can get the ratio, the better your credit score. This option is best when you don’t owe much money, and thus your utilization ratio will increase significantly.

Get your dream house from the reputable mortgage lenders at IP Advisors Inc. in Mesa, AZ. Their team is dedicated to helping you make informed decisions and receive the best rates. For both first-time and experienced buyers, they strive to make the process of getting a mortgage straightforward. Make an appointment with one of their experts today by calling (480) 900-4525, or read about their home loan expertise online.