Holiday Bills Hurting Home-Buying Dreams? Toast to Healthy Credit in the New Year!

For so many people today, the holiday season ‘tis the season to spend, spend and spend some more. Who doesn’t love the joy that is found by giving someone a gift that ranked high on their holiday wish list?

But, after the holidays are over, there is no joy in seeing a depleted bank account or, worse yet, receiving the credit card bills that follow those pricey gift-giving ventures. Nothing could be truer for today’s homebuyer, whose short-term goals may have been providing fleeting holiday joy to their loved ones, but whose ultimate goals are securing mortgage approval and a low interest rate on the home of their dreams.

So, if the holiday season hit you, your bank account or your credit score a little harder than you had planned and you need to boost your credit in hopes of buying a ho-ho-home in a hurry, there are some immediate actions you can take to get your finances back on track.

Here are five ways you can help to rebuild your credit score after the holidays:

Check your post-holiday credit report. Unfortunately, the most wonderful time of the year can also be the prime time for hackers and scammers to capitalize on gift-giving generosity. If you’re in the market to buy a new home (and, even if you’re not), it is imperative that you scour your bank account activity and credit card bills after the holiday season to make sure that all of that spending was done by one person… you! Running a check of your credit report shouldn’t count against you as you plan to apply for mortgage approval. If anything, being on top of your spending habits will help you out through the home-buying process.

Pay your bills… on time. Payment history can make up nearly half of a person’s credit score. So, doing your due diligence to send those holiday credit card bills in on time will go a long way in making up for holiday spending splurges. In fact, when you’re applying for a home loan and trying to secure a low interest rate, mortgage lenders will be paying closer attention to your account activity over the last few months. While they may notice a spike in spending around the holidays, make sure they also see responsible bill-paying in the aftermath.

Make better-than-minimum payments when possible. If you max your spending during the holiday season, making more than your minimum credit card payments once January hits may seem like punishment after a holly, jolly holiday. However, just like paying your bills on time, debt-to-income ratio accounts for an almost equally-large chunk of your credit score. When your ultimate goal is home ownership, the lower your debt-to-income ratio is equals the higher home price you can afford and the lower interest rate you can qualify for.

Keep unused credit accounts open. Even if you paid cash for all of your purchases during the holiday season, it is best to keep unused credit card accounts open during the mortgage approval process. Why? It all comes back to that debt-to-income ratio. Unused or rarely used credit card accounts show a lender that you’ve got more to spend, so you’re more likely to be approved for a higher home price and lower interest rate when it comes time for mortgage approval during the home-buying process.

Resolve to establish responsible credit habits. Whether you’re planning to make a home purchase early in the new year or just sometime over the next several months, January is the perfect time start healthy spending habits. Despite what your credit card history and bank account may look like after the holiday season, the new year provides a fresh start for establishing and building or reigning in and rebuilding your credit score, so that you not only can apply for, but be approved for that big home purchase you’re seeking.

This post is sponsored by PA Preferred Mortgage:

Pennsylvania Preferred Mortgage is a full service mortgage banker and is a member of the Prosperity Home Mortgage, LLC family. Specializing in residential and refinance loans, Pennsylvania Preferred Mortgage offers a wide range of mortgage products, including fixed and adjustable rate mortgages, jumbo loans, Federal Housing Administration (FHA) and Veterans Affairs (VA) loans, and renovation financing. Learn more at www.papreferredmortgage.com.