In this article, we will discuss the Top 5 Ways to Increase Your Credit Before Applying for a Mortgage You’ve saved up for a down payment on a new home, but if you have average credit, you may be able to qualify for a mortgage and buy the home of your dreams but you might be paying more for your loan. The higher your credit score the better loan terms you will get. The good news is, you can do a lot to improve your score before you apply. With these tips, you will have a great opportunity to get approved and locked in affordable interest rates.
1. Pay your credit card :
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If you have a lot of credit card debt, lenders will probably think twice before offering you a mortgage because both your credit utilization ratio and your loan income will be higher. So it’s a good idea to start paying off these balances before sending out mortgage applications. Make a minimum payment or more on your cards each month. Not only will this increase your credit score and reduce your overall debt burden, but it will also save you money on interest and show potential lenders how responsible you are with your payments.
Related: How To Get Rid Of Credit Card Debt
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2. Pull out your credit reports and check for errors :
Mistakes happen. And when they do, you don’t want to be the last person to learn about them. Get free credit reports online from the three major credit bureaus, TransUnion, Equifax, and Experian, and check for any errors.
If you notice a mistake, incorrect information, or something that should no longer be on your credit report file a dispute as soon as possible. You can file a dispute yourself with our free dispute letters.
After submitting these forms, the credit bureau will contact the source, and the claim will be investigated within 30 days. You should include copies of your proof to the credit bureaus. The more proof you can provide the better and faster the outcome will be.
Also, Credit Saint, a credit repair company helps you with understanding of removal of any late payments. Credit Saint reviews your credit report and if you notice any hard enquiries, helping you to get those items removed.
3. Stop Applying for new credit:
If you are moving into a new home, you may be interested in getting a new car or fill your room with new furniture, but when you apply for new credit cards and auto loans, these will affect your credit. Any time you apply for a loan, the lenders will pull your credit score, which is called a hard inquiry. You should be limiting how many new accounts you open when you are trying to buy a home.
A home is one of the biggest purchases you will make, so lenders want to make sure you can pay those monthly mortgage payments. If you open a new credit card and buy a new car at the same time your applying for a mortgage, the lender might think you stretched your borrowing too far and may not approve you. And many new inquiries will raise red flags for lenders.
It’s better to wait until you close on a new home to buy a new car or open up a new credit card.
Delays in credit card applications can be a good call. But it’s usually not a good idea to close all your paid cards. If you do, your credit usage ratio may down and your credit history will lower which can also hurt your score. Instead, keep your accounts open. The goal with credit is to have a high credit limit and a long credit history. If you paid off a credit card and don’t plan on using it set up a subscription service, such as Netflix, using that credit card and pay it off every month so the credit card company doesn’t close that card.
4. Shop with purpose:
Shop for a mortgage with the best rates, but don’t let your search drag on. The best thing to do is to get pre-approved for a mortgage loan. Once you are pre-approved your FICO credit score will be pulled once and your loan rate will be locked in for 90 days. Buyers will take your offers more seriously if you are pre-approved and it will move the closing process along at a faster rate.
If you don’t get pre-approved or take a long time to find a home, you will need to apply for a loan again and that means more hard inquiries to your credit which will lower your credit score.
5. Save aggressively :
You are now focused on getting a mortgage, but remember to protect your credit score after you have been approved. Once you pay for your new home, your savings may take a hit and you may feel tempted to start applying for more and more credit. In short term, this may be fine, but making it a long-term habit can cause some serious damage to your credit score.
If your savings account goes down, consider cutting back on fixed costs and working to save 6 months’ worth of living expenses. That way, in case of an emergency, you won’t have to use your credit card as a splinter. While protecting your credit score, you will also have an easy time applying for Garg and other credit lines down the road.
There are many ways to increase your credit, but these 5 Ways to Increase Your Credit Before Applying for a Mortgage are the fastest ways for your to improve your credit and get approved for a home loan.
Do you have bad credit, no credit, or want to learn how to become a credit expert?
Check out our credit repair training and learn:
- What your actual credit score is
- How to get a copy of your free credit report
- How to get your credit back on track today
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