Your credit score plays a big part in not only getting approved for a home loan but also impacts how low your rate and monthly payment will be. Use these tips to set yourself up for success before applying!
Your score
You won’t know exactly when the major companies (Experian, TransUnion or Equifax) will pull your credit report. Look it up now and check for anything outdated, incorrect or inaccurate. If you find errors, you can file a dispute with any of the companies mentioned above. Get a free credit report once a year at annualcreditreport.com.
BILLS
Start getting your bills current and paid on time for several months before applying. If you’re less than 30 days late and can make a payment current today, do it. Late payments usually aren’t reported until after the 30-day mark.
BALANCES
Having a higher card limit may boost your credit, but having a high balance can hurt. How much you borrow vs. how much you owe makes up for 30% of your score. Using more than 35% of your credit limit doesn’t help your score. If you pay down your balances below 15% of your limit, you could see a 40-50 point increase to your overall score.
UNUSED ACCOUNTS
The average age of your account counts towards your score, so even if you have a long-standing credit card that you never use, it may help you in the long run. Keep the account active and use $5 on it every 6 months or so.
CONSOLIDATE CARDS?
Consolidating credit cards can reap huge financial savings, but unless you save dramatically, putting all of your debt onto one card that maxes the limit could hurt your score. The larger the balance is on your card, the higher the payment, which means less money you can use to qualify for.
Looking for more tips before you apply for your home loan? Feel free to contact me for fantastic referrals and names of some of the best companies out there!