Some Tips About Credit Before You Apply For A Mortgage Loan
Here are some tips about credit that can and should be considered before applying for a home mortgage. I talk to a good many folks who want to buy a home who have either have applied for a home loan and ran into an obstacle, or they just want to be prepared.
Why is your credit score when you apply for a home loan so important? It is important in that some programs require a minimum credit score to qualify and your score can affect the rate you ultimately receive.
Every situation is different but as a rule some things will affect your credit score that may not be obvious. Most folks are aware having inquiries on your credit can drop your score. Opening up a new line of credit, closing a line of credit and paying off collections can have a negative impact on your score as well.
Paying down balances or paying off credit cards can have a positive effect on your score. The single biggest thing I see affecting credit scores is that applicants are utilizing so much of their available credit. If you have a revolving line of credit that has a $1000 limit and you are using $800 of it then you are not going to score as high as the person who is only using $100 or none of it. Carrying a balance on a credit card and paying it a little each month is not helpful. It is more helpful if you pay the card off every month or have a few months where you do not use the card at all.
I like to talk to home buyers before they take the plunge and start looking at houses. A conversation will identify whether a person can or should improve their score before credit is pulled to give them a bit of an edge. If you want the best interest rate then it behooves you to have the best credit score. Starting on this aspect of the home buying process first makes sense.