Mortgage lenders use a credit score (frequently referred to as a FICO score) along with other factors such as your debt to income ratio, employment and credit history to determine your credit worthiness. There are things that you can do to improve your credit score, as well and some things you should not do to maintain it. Here are a few helpful hints on both:
- Do Correct any errors on your credit report. This is a fast way to raise your credit score.
- Do reduce any high balances on credit cards. Another fast way to improve your credit rating.
- Do pay your bills on time. If you missed payments, get current and stay current. The longer that you pay your bills on time, the better your credit rating will be.
- Do contact creditors or see a legitimate credit counselor if you’re having trouble paying bills. This won’t improve your credit score right away, but if you start paying on time, your score will eventually improve.
- Do keep balances low on credit cards. Lots of outstanding debt can hurt a score.
- Do use credit cards, but manage them responsibly. Having cards and installment loans and paying them on time will raise your credit score. People with no credit cards are usually a higher risk than people who use their credit cards properly.
- Don’t apply for several credit cards in a short period of time. Looking for new credit can indicate higher risk and lower your credit score. If you’re shopping for a car or a mortgage loan and have a few pulls over a short time, it’s considered as one transaction and not as affected.
- Don’t move your debt around. It’s better to pay down revolving debt than to move it around. Owning the same amount on fewer accounts may lower your score.
- Don’t close unused credit cards to raise your credit score. Closing an account doesn’t make it go away. It still appears on your credit report and may be considered in the credit score.
- Don’t open several new credit cards that you don’t need, to specifically try to improve your credit score. This can backfire and reduce your score. Best advice is to open up new credit slowly, if you’re just starting out and trying to build credit.
- Don’t open new credit card accounts just to have a better mix of credit. It won’t raise your credit score and the new account could lower it.
- Don’t think closing an account makes it go away. Closed accounts still show up on your report and may be factored into your score.
If you’re interested in getting pre-approved for a mortgage loan, let’s get started! It’s best to do this early if you’re concerned about your credit and need to improve it so that you can get the best rate and program out there.
We’re here to help you, every step of the way!