Your credit is one of the most important criteria in determining your mortgage eligibility- it impacts the interest rate that will apply to you and, in a worst case scenario, could affect your ability to qualify at all.
Below are some Treats; ways to improve your credit score before you search for a home, and Tricks; things to avoid when qualifying for a home loan.
Treats: Ways to increase your credit score
Look for past due balances on a credit report and bring them current.
Reduce all outstanding debt to as close to zero as possible-try to keep credit balances at less than 50% of available credit.
If married, keep separate credit card accounts-this provides flexibility in transferring some or all balances to one spouse to increase the credit score of another, and allows one spouse to become the sole borrower if necessary.
Request an increase in available credit lines on credit cards to reduce debt ration-but only if the credit card company can do this without a hard credit inquiry.
Past due and charge offs-pay only those within the last two years. Once it is beyond two years, there will be no impact on your credit score if wiped out, and could even bring it down temporarily.
If you have an outstanding debt that has been incorrectly charged to you or has yet to be cleared, notify the creditor and credit bureau with a request that it be deleted. They have an obligation to act within 30 days.
Tricks: When applying for a loan-avoid these pitfalls at all costs!
Don’t buy or lease an auto-it will impact your debt to income ratio.
Don’t move assets from one bank account to another. It will show as a new deposit a need additional verification, complicating the application process.
Don’t change jobs-there may be a probationary period in which income from your new job cannot be considered.
Don’t buy new furniture or major appliances-this may increase the amount of debt you are responsible for on a monthly basis and could disqualify you from a loan or cut down on the available funds you will need at closing.
Don’t attempt to consolidate bills before speaking with your loan consultant. It may not be necessary to do this.
Don’t pack or ship important financial information needed for loan application-obtaining duplicate copies can take weeks and slow down the transaction.
Need help obtaining a credit report? Your loan consultant can help you with this, or you can get one, for free, from any of the 3 main credit reporting agencies:Equifax, Experian,TransUnion
Want to learn more? Click here for information on what goes into a credit score.