Let’s face it - unless you are already wealthy or just won the lottery you are going to need a good credit rating to purchase a house. With a substandard rating you’ll be stuck with high interest rates and fewer choices.

Mortgage companies want to invest their money with a reasonable chance for return, not gamble with it. Therefore, one of the first steps when shopping for any kind of real estate is to make sure your credit is acceptable.

So what is an acceptable level of credit? Well the general consensus is the minimum to pass most automated systems is 620. Credit scores range from a low of 400ish to a high of 850. Most lenders will pull all three of your scores and use the mean (not the average). So if your credit scores from the big three credit companies was 590, 630, and 640 then the 630 score will be used.

Your credit score along with some other factors from your application are generally fed into an automated program with one of three possible results.

1. Accept- hooray!

2. Review- there is still hope but a human will now review your application and make a decision.

3. Deny- Yikes!

What can you do to increase your score? Here are some general tips to increase your credit score today.

1. Get a free credit report. You’re entitled to one free report from each of the agencies on a yearly basis so that you can see where you stand.

2. Correct errors on your credit report.

3. Make sure you are up-to-date on current credit cards or loans

4. Pay down your credit balances

5. Avoid applying for new credit. Excessive inquiries on your credit report can lead to a lower score.

6. Keep accounts that you’ve held for a long time open. Long term accounts demonstrate a level of responsibility by the borrower.

In the next article we’ll discuss some helpful next steps as you’re applying for your real estate loan. We know you can hardly wait!