Guide to Credit

A homebuyer’s credit rating can play an important role in the buying process. A person’s creditworthiness may affect the amount one can borrow, the interest rates and even the ability to obtain a mortgage loan in the first place.

In order to help customers build good credit and increase their ability to obtain better loan terms, Vanderbilt Mortgage and Finance, Inc., is offering these tips for improving credit.

Get a co-signer
One way to build better credit might to get a co-signer to apply for a loan with you. With a co-signer, the loan specialist handling your case will base their decision on more than just your own credit. When choosing a co-signer, it is best to choose someone who has decent established credit, someone you can trust and who you have an established positive relationship with, such as a parent, spouse, sibling, close relative, or close friend. 

Get a secured credit card
A secured credit card, or a credit account with a determined line of credit, is a good way to begin building your credit. Your credit line is determined by the required security deposit used to obtain the card and is equal to the credit line. Credit card debt often has the most negative affect on a credit score because it is a consumer debt that is not tied directly to any assets. Having a determined line of credit can help you keep the amount of credit card debt you accumulate manageable.

Be aware of how often you use your credit cards
A common mistake when building credit is using your credit card too much. Staying aware of your credit card use can help to keep from falling into excessive credit card debt which will have a negative mpact on your credit score. You actually only need to use your credit card once or twice per month to being building a credit score. 

Open a checking or savings account
Opening a new checking or savings account may be seen as a sign of financial stability. Depositing funds into your bank account can help build your financial stability and show your home loan specialist that you have funds available in addition to your income to cover expenses in case of an emergency.
Pay bills on time

Late or missed payments on any credit accounts such as credit cards, mortgages and other loans could result in a drop in credit score. Making payments on time, making additional payments whenever possible and paying extra to principal will also help to keep a good payment history and decrease the payoff timeline. Using an Extra Principal Payment Calculator tool can help calculate the savings that come with paying extra.

Minimize outstanding debt and keep existing debt manageable
Paying statement balances in full instead of letting debt accumulate can improve credit scores, which can result in being offered better terms from lenders. Lenders often check a borrower’s credit report when they apply for a loan and measure the amount of debt they’re carrying against the loan amount they’ve requested. Excessive debt is one of the factors that could cause a lender to decline the application.

Avoid applying for unnecessary credit
Credit applications can appear as inquiries on credit reports, which suggest to lenders that an applicant may be taking on additional debt. Be aware of sales that offer purchase discounts if you apply for a credit card. These could show up as inquiries on your credit report. These inquiries remain on credit reports for two years. Instead of applying for additional credit, use existing lines of credit to prove responsible credit management by paying bills on time and paying off debt quickly. 

Be aware of your credit score
Quarterly credit checks can help you to be aware of any issues that may be keeping your credit from increasing. You  can find your credit information through the three major credit bureaus. You can check your credit reports for free at
Things to look for on your credit report could include: 
  • Accurate personal information
  • Late payments you can prove were paid on-time
  • Correct amounts owed on open credit accounts
  • credit inquiries made by companies you do not recognize

Check out the full Guide to Credit for more helpful tips to manage credit.