When you are about to apply for a home loan, it is important to keep your credit score as high as you can so that you can qualify for the most competitive interest rates and the most favorable terms.
It is common for homebuyers to make unintentional mistakes with their credit which can reduce their scores while shopping for a home. Following are some credit mistakes to avoid at this critical juncture.
Avoid Credit Mistakes When Applying for a Mortgage
- Not checking your credit scores and credit reports as soon as possible. While many consumers are deeply concerned about their credit scores, a surprising number of borrowers neglect them almost completely. They may not even check their credit scores before applying for a home loan. This is one of the biggest mistakes you can make, as you may be surprised by how low (or high) your score actually is. It is also a mistake not to check your credit reports as well. Your credit report is different than your credit score, which is a numerical representation of what is on your report. Sometimes, what you report says is not entirely accurate. Unless you check your report, you have no way of correcting those inaccuracies and repairing unnecessary damage to your score. The sooner the better. This happens more frequently than you might think, so do not skip this important step.
- Closing old credit accounts. The next mistake to avoid in managing your credit when you will be applying for a mortgage is closing old credit accounts after paying them off or old account you do not use any more. Doing this will remove valuable credit longevity and senior accounts from your profile while decreasing the total amount of unused credit in relation to your credit balances. This in turn may lower your score.
- Applying for new credit accounts. The opposite mistake is also easy to make. In an attempt to diversify your credit accounts, you may think that applying for a number of new accounts at this time would be logical. Unfortunately, it also is likely to result in hard credit checks which ding your score.
- Buying a lot of expensive furnishings on credit before closing on your home. When moving into a new home, you might need to purchase new furniture. You also may be thinking about buying a variety of household appliances. Since all of these costs can add up rapidly, you might turn to credit in order to purchase them in time to move in. But if possible, you should avoid making these purchases until your home has closed as it will raise your credit utilization. You want to keep that low in order to maintain your score during the qualifying process.
- Thinking it is too late to raise your score. One more mistake which homebuyers are prone to making with credit before applying for a home loan is believing that it is too late to make any significant improvements to their credit scores. But you may be surprised by how rapidly you can make improvements if opportunities exist such as the chance to correct errors in your credit reports or get your utilities bills incorporated into your score. Just a few small actions could give you the boost you are looking for to qualify for a more competitive mortgage.
Whatever Your Score, We Can Help You Apply for an Affordable Home Loan in Washington State
With the tips above on your side, you can maintain your credit score during the home loan application process. But whether your score is ideal or not, Blue Square Mortgage can connect you with a suitable home loan. To schedule your consultation, please call (206) 352-6453.