Buying a Home? Read Our DOs & DON’Ts On Improving Your Credit Score.
Lenders review your credit score to determine whether or not to approve you for a home mortgage. The higher your credit score, the better your chances are for approval on your home loan.
If your credit score is on the low side, and you plan on buying a home in the future, taking the time to improve your score may be worth the extra effort. Here is our list of DOs and DON’Ts for improving your credit score before applying for a home mortgage.
What to DO:
1. Obtain your credit report and correct any errors you find. Since mistakes happen, make sure you aren’t paying for someone else’s. Also, checking your own credit report does not impact your score – so check it regularly!
2. Pay down your credit card bills. If possible, pay off your balance each and every month. Overall, try to keep your credit balance low compared to your credit limit. High debt-to-credit-limit ratios drive your scores down.
3. Stay current. Pay all your bills on time. Late payments will definitely knock down your score.
4. If possible, wait a year after your credit problems are resolved before you apply for a mortgage. After 12 months, you should be penalized less.
5. If necessary, seek help from a legitimate, non-profit credit counselor.
What NOT to Do:
1. Don’t be tempted to move debt around to alter your credit score; transferring debt from one credit card may lower your score.
2. Don’t be tempted to open new accounts to alter your credit score. Adding accounts too quickly sends a signal that you might not be responsibly handling your credit, and too much available credit may lower your score.
3. Don’t be tempted to close accounts to alter your credit score. Closing an account won’t remove it from your report. It may still be considered for scoring purposes.
4. Don’t be tempted to buy anything on credit for your new home, such as major appliances, until after your loan is approved. Your home purchases won’t do you no good if you can’t get a mortgage.
5. Don’t be tempted to get “help” from finance companies. Even if you pay on time, interest is generally high, and may even be considered a sign of poor credit management. Definitely avoid scam artists; anyone who promises a quick fix.
Ultimately, there are no quick-fixes, except paying down debt and successfully disputing any damaging misinformation on your credit report.