Tips to Improve your Credit Score Before You Apply For A Mortgage Loan

When applying for a home loan, your credit score has a big impact. It’s important to understand what your credit score is, how your actions can positively and negatively impact your score, and the steps you can take to improve it.  Not only does it affect if you will qualify for a mortgage, your credit score is also one of the main factors lenders look at to determine your interest rate and payment terms. The higher your credit score, the better interest rate you can get.

So, if you are thinking about buying a home in the near future, before you start house hunting or get pre-approved for a loan, it’s a good idea to check your credit report and find out what your credit score is.  You are entitled to a free credit report once a year from each of the three credit bureaus – Equifax, TransUnion, and Experian, which you can access at www.annualcreditreport.com.

Whether your credit score is already in good standing or your score could use some help, here are a few things you can do to strengthen or improve your score before applying for a mortgage loan:

Check For Errors – A mistake on your credit score can cost you when trying to secure a home loan. If there are mistakes on your credit report that make you look less appealing to lenders, it can prevent you from getting the best rate possible. This means you could be paying much more than you should on your mortgage each month. Mistakes do happen, so review your credit report closely to ensure everything is correct and dispute any errors you might find with the appropriate credit bureau. Credit reporting companies are legally obligated to clear up any mistakes on your report, but it could take 30 days or more, so contact them as soon as possible if you find any errors.

Pay On Time – Your payment track record is one of the biggest contributing factors to your credit score, and consistently making late payments will count against you. Regularly making on time payments will add to the positive history on your credit report – the longer you pay your bills on time, the more your score should improve. Set up payment reminders for yourself if you often forget when bills are due, or sign up for automatic bill payments, so you don’t get penalized if a phone or credit card bill does slip your mind.

Pay Down Debt – The amount of debt you owe is another factor that contributes greatly to your overall credit score.  The less available credit you use, the better your score. The most effective way to improve your credit rating in this area is to keep your balances as low as possible and pay down high interest debt.  High interest debts like credit cards are weighed more heavily than other kinds of debts such as student loans or car loans. Paying down or paying off these high interest accounts can have a positive impact on your credit.