If you’re getting ready to apply for a mortgage, one of the most important factors to consider is your credit score. A good credit score can make it easier to get approved for a loan, obtain better interest rates and even save you money in the long run. It’s worth taking the time now to improve your credit score before you apply for a mortgage, and here are some tips on how to do just that.
First things first: know your credit score. Your credit score is one of the most important factors lenders use when deciding if they should approve your loan application. You can get a free credit report from the three main consumer credit bureaus: Experian, TransUnion and Equifax. These reports will show you what information is being used to calculate your score, so if there are any inaccurate or outdated entries on them, you can dispute them and get them removed from your report. It’s also worth checking any errors on your report as these can lower your score significantly.
Pay off any outstanding debts as soon as possible. This will help improve your credit utilization ratio which is one of the biggest factors in determining your credit score – it’s the amount of available credit that you’re actively using compared to what you have available. Aim to keep this below 30%, so if you have $2,000 in available credit and owe $600, try paying off at least some of that debt before applying for a mortgage loan. This can help boost your rating quickly and significantly.
Keep up with payments on time every month – this is another factor in calculating your FICO score and it’s important that lenders see that you’re able to pay bills reliably and on time each month. Late payments or missed payments can lower your FICO score dramatically, so make sure all bills are paid before their due date each month or set up automatic payments if possible – this will help ensure that no payments are missed which could damage your rating even further.
Avoid closing any accounts unless absolutely necessary – another factor determining how high or low your FICO score is going to be is the length of time since accounts were opened and closed (the longer they’ve been open without closing them, the better). Closing accounts could result in a drop in points on both short-term and long-term scores so try not to unless absolutely necessary – it may be beneficial to keep accounts open even if they have zero balances as this demonstrates financial responsibility over time which could be helpful when applying for loans in future too!
Finally, don’t forget about those small details – make sure all contact information listed on accounts such as utility bills or other services are up-to-date as this could affect how lenders view applications; also double check bank statements regularly just in case there are any discrepancies which could also hurt scores (if they show up on reports). Taking a few extra steps now may seem tedious but they’ll help ensure that lenders see all necessary information accurately when assessing applications which could be essential when getting approved for mortgages!