When applying for a mortgage, one of the biggest factors that lenders consider is your credit score. A low credit score can leave you with an unfavorable interest rate on your mortgage, whereas a high credit score can save you thousands of dollars over the life of your loan.
Thankfully, improving your credit score is not an extremely difficult task. There are five things that every potential homebuyer should do in order to improve their credit score, and with the help of a mortgage professional like the ones at Rex Homes, improving your credit score and securing a lower interest rate on your mortgage application is well within reach.
Correct any Mistakes on Your Credit Report
Even though we continually improve and find ways to minimize our mistakes, the unfortunate truth is that human error will always be a part of our lives. Very frequently, there are errors on our credit reports that, when corrected, can improve our credit scores immensely.
When reviewing your credit report, you may find information that hasn’t been updated to reflect your current status, accounts that were created fraudulently in your name, accounts that were incorrect or appeared too many times, and any number of other mistakes. Any or all of these errors can affect your credit score more than you could imagine.
The process for correcting these mistakes is, luckily, fairly painless. All that is required is that the individual follows the directions for how to dispute the errors, which can be found on each of the three credit bureau websites: TransUnion, Equifax, and Experian.
Pay Down Your Debt
Maintaining evidence that you are able to pay off your debt in a timely fashion can help to maximize your credit score as well. Lenders like to see that individuals can handle debt and pay their dues responsibly.
Address Bills in a Timely Manner
Late payments can be devastating to your credit score. It is vital that you try, as best you can, to avoid making any payments past their due date. Easy ways to keep on top of your bills are to set up automatic payments, and keep your payment dates organized on your calendar.
Limit Credit Card Usage
Keeping your credit card balances very low, especially near the time of your loan application can have a huge influence on your credit score. So, when it comes time to apply for the mortgage, be cognizant of your spending and wait to make any purchases on credit that aren’t immediately necessary.
Do Not Open New Credit
A big concern of lenders is that the mortgage recipients are too dependent on credit. Demonstrate to them that this is not the case by minimizing your new credit applications, no matter how enticing some of the offers may be.
Buying a home is an exciting process filled with equal parts stress and happiness. Your credit score is a critical piece of the puzzle when it comes time to apply for a mortgage, and following the steps listed above can put you in the best position possible when you finally do apply. If you need any help in the process, qualified mortgage professionals are ready and willing to assist you.