How to Improve Your Credit Before Applying for a Mortgage

Your credit score matters a great deal for your mortgage. Your credit score is a three-figure score lenders look at to determine if you qualify for a home loan, as well as what your interest rate will be. If your score is high, you can save a great deal of dollars in your mortgage, but a low score could increase your monthly payment or prevent you from obtaining the loan.

The good news is that your score can be upgraded before you apply. If you wait and plan, you can boost your credit score as well as obtain favorable mortgage terms.

Check Your Credit Report for Errors

Begin by obtaining your free annual reports from all three of the main credit reporting agencies: Experian, Equifax, and TransUnion. You can obtain one free report from each of them once a year.

Ensure you take a keen look at your reports for damaging blunders. Some of the common blunders are incorrect payment histories, fraudulent accounts, incorrect credit limits, as well as outdated negative remarks that should be removed.

Be cautious with your own details as well. Incorrect names, addresses, or Social Security numbers can occasionally reflect other individuals’ credit activity on your report.

Challenge Wrong Information

If you notice errors on your credit reports, don’t overlook them. Inform the appropriate credit bureau immediately. You can normally report them online, over the telephone, or in writing, but reporting online is frequently quickest.

If you dispute, provide clear documents to back what you are saying. These may be bank statements, receipt for payment, or letters from creditors. That credit bureau must investigate your dispute within 30 days and must remove or correct any details they cannot substantiate.

Check your differences to ensure they are properly fixed. Ultimately, you need to speak with your original creditor personally to deal with more severe issues.

Pay Off High Credit Balances

Credit utilization is what you can borrow relative to what you utilize, and it significantly impacts your score. Experts recommend keeping your utilization rate under 30% for all your cards, but using less than 10% helps you obtain an even superior score.

Don’t pay your largest debt first. Consider using the debt avalanche approach, as you pay high-interest charge cards first. Even minor reductions to your debt can significantly aid your score within a short time period.

If you are able, pay multiple times a month rather than waiting until your due date. That keeps your balance lower because your credit card issuer reports what your balance is on your statement closing date.

Do Not Take New Credit

You can be tempted to get new credit cards in order to increase your amount of credit, but you should not get new cards. Every time you obtain new credit, a hard inquiry is placed on your credit score that temporarily lowers your score a few points.

They will also decrease your average age of accounts, another factor that impacts your score. If you know you will be obtaining a mortgage in six months, you should not be going out and starting new lines of credit unless absolutely necessary.

Pay All Your Bills on Time

Payment history accounts for a noticeable chunk of your score, so it matters a great deal. If you skip a payment, your score falls significantly, particularly if you don’t have a long history.

Be sure to pay at least your minimum due for each of your credit accounts automatically. Program your calendar or phone apps with reminders of your due dates. Consider paying a day or two in advance to be sure it can be processed and allow for any possible delay.

If you haven’t paid some of your previous bills, ensure you pay all your new bills promptly from now on. On-time payment can save you from difficulties stemming from previous late payments.

Start Improving Your Credit Score Today

It can take a couple of months to increase your score, so start as early as possible. Whether seeking a new mortgage or perhaps a mortgage refinance in South Carolina, there’s no better time to start. The best improvements will reflect on your history within 1-3 months, but some of them can take place earlier.

Consider consulting a mortgage specialist. They can let you know what your target score will be for your desired loan and offer you recommendations for your circumstances. Through time and effort, you can increase your score to obtain more favorable loans for your ideal home.