Once you’ve made the decision to buy a home, it’s important to consider your credit before seeking mortgage pre approval. Good credit standing is an important trait to have before bidding for a home. Here’s why.
Review Your Credit Score
As you get started, the first step is to check your credit score. Credit scores range from 300 to 850 – the higher your score, the better. Conventional mortgage lenders will offer loans to consumers with a 620 credit score. However, they typically prefer to see a minimum FICO score of 720 or better. A low score doesn’t mean you won’t be able to get a loan, but it does mean you likely won’t receive the most favorable interest rates or loan terms.
Check Your Credit Report
By law, all consumers can obtain one free credit report each year from each of the major credit reporting bureaus: Experian, Equifax, and TransUnion. Order your free report and go through your report carefully to see if any issues that might be dragging your credit down are listed. Errors can be disputed. Also, examine how much debt you owe and plan to pay down as much as you can before you apply for a mortgage.
Pay All Bills On Time
Starting the house-hunting process is an exciting time, but don’t get so excited that you forget to make your scheduled payments. Late payments can quickly drag down your credit. As you prepare to apply for a mortgage, it is most definitely not the time to be late with any payments. You want to look as stellar as possible when it comes to paying debts.
Pay Down (or Off!) Outstanding Debt
The less debt you carry, the more favorably a lender will view your application. Lenders will check a borrower’s credit utilization ratio. To figure what yours is, divide how much you owe on credit by how much credit you have available to use.
Avoid Opening New Lines of Credit
Six months prior to applying for a mortgage, avoid opening new lines of credit. New credit lines will temporarily bring down your score. Lenders will also look at your available credit to see how much you can potentially borrow. As a result, having too much available credit could push you into a higher-risk category. Additionally, avoid making any big purchases in the months before you apply.
Keep Old Credit Lines Open
If you have credit cards or other accounts in good standing, don’t close these even if you don’t use them. A good credit standing for these dormant accounts will boost your score. Start to use them sparingly and then pay them off in full.
Struggling With Your Credit Score? Contact Key Credit Repair Today
Key Credit Repair has been helping people for more than 12 years. Not all credit repair companies are created equal. Our methods to help you achieve stronger credit are rooted in experience. We know how to correct inaccuracies on your credit report and we’ll teach you how to maintain good credit, along with providing you with the tools you need to succeed now and in the future.