If you’re about to apply for a mortgage, make sure your credit is in good shape before you do by following these four steps.
When it comes time to apply for a mortgage, your credit score will play a crucial role in what you’re approved for. To make sure your credit is in the best shape possible before you apply, there are four steps you should follow.
1. Remain on-time on all of your accounts. This sounds simple, but it’s incredibly important. Having late payments on your credit report, especially within the last 12 months, can drop your score by between 50 and 100 points. You may still be able to qualify despite this, but a lower credit score could negatively impact the rate and terms of your mortgage.
2. Limit the number of inquiries and new accounts you make. Don’t apply for new lines of credit unless you really need it. Otherwise, doing so could damage your score.
3. Settle debts on your credit report when appropriate. While paying off certain debts can sometimes actually damage your score, settling certain kinds of debt can be beneficial. Medical debt, for example, is often deleted from your report once paid. Getting a medical collection deleted can cause your score to jump up by 20 to 50 points.
4. Pay down any revolving debt. Paying down revolving credit lines, like credit cards, can be beneficial to your score. However, paying off these lines of credit may not be the ideal approach. Instead, stick to paying them down within 2% to 9% of your limit. If you have a $1,000 limit on your credit card, for example, your highest score will come from having a balance at or below $90, rather than a total $0 balance.
If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.