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Tips to Improve Your Credit Score Before Applying for a Mortgage

Having a less than ideal credit score can take the fun out of buying a new home. Your credit score is one of the biggest factors that a lender will evaluate when you apply for a mortgage, and the interest rate you are offered is directly related to your credit score. Lenders want to see that you can pay back the loan in a responsible and timely manner, and use your credit score as an evaluator to determine this. If you foresee yourself buying a home in the next few years, start paying attention to your credit score now to avoid potential issues when it’s time to apply for a mortgage.

Check Your Current Credit Report

If buying a home is on the horizon, start paying close attention to your credit report. Identifying problems or issues early will help you avoid headaches when the time to apply comes. On average, 1 in 5 Americans have an error on their credit report. The only person that is responsible for identifying and fixing mistakes is yourself. Mistakes can take a while to be identified and fixed, so be sure to file any mistakes immediately after finding them. You do not want to be dealing with mistakes or finding missing documents on top of applying for loans and your home search.

Analyze Your Payment History

Are you currently behind on any payments? Missing even small payments consistently can hurt your credit score. Taking care of missed payments as soon as possible can help boost your credit score. If you are having trouble paying bills on time, then try setting up payment reminders or automatic payment methods to help avoid tardiness. Banks often offer these services and can help you get back on track.

Don’t Alter Your Credit Card Holdings

All your good accounts increase your credit score, and closing them will only shorten your credit history. Borrowers with shorter credit histories sometimes may not look as experienced as ones with longer credit history. Showing a history of good money management is one of the key factors in deciding if you are granted a mortgage and the rate associated with it.

Opening a new credit card account can be considered a risk factor and thus may lower your credit score temporarily. A small percentage of your credit score is actually based on your credit age. Credit age is essentially how long you have been using credit for. New credit cards can be considered liabilities because of lack of history of payments on them.

Getting these things out of the way early will enable you to enjoy the home buying process. Don’t be afraid to ask your credit card company if you have any mistakes or questions with your account. Setting yourself up with a solid credit score can help you in the mortgage process. For more information about credit scores and first time home buyer information, download our eBook now!

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