This week we are going to continue our conversation around your credit. As discussed last week, if you are in the market to buy now, very soon or sometime in the future, it is wise to start here.
Your credit mix is also important when a lender is reviewing your qualifications to buy a home. Just having the right credit score will not guarantee an approval, your credit mix is just as important. The term ‘credit mix’ encompasses the items that make up your credit as well as the age of your credit report.
Your credit lines (or tradelines) are very important; generally speaking a good mix is 2 – 3 unsecured tradelines lines, i.e. credit cards, lines of credit etc….; 1 – 2 installment loan(s), i.e. a car loan and/or fixed rate loan with the occasional student loan mixed in for a good number of us! For your credit lines, you should try and keep your balances at 30% of the line amounts. An example of this is you have a credit card with a limit of $2,000, you want to keep the balance at no more than $600 while you are shopping for a home.
The age of your report is also important, you may have a great score and all the tradelines lines needed, but if you credit is only 1 year old, additional questions may be asked. To verify your credit age, confirm how old your oldest tradeline is, that will determine the age of your credit. Until next Wednesday, have a great week!