How to Avoid Unexpectedly Decreasing Your Credit Score

You probably do your best to make timely payments and maintain a healthy credit score. This is important when you are applying for a mortgage, since your score helps determine whether you are approved for a loan, and at what interest rate. But there are some habits that can decrease your score that a lot of people are not aware of. Below, we give you tips to help you avoid those mistakes.

1. Don’t frivolously request a higher limit. If you have a good reason to request a higher credit limit, and you are pretty sure you will be approved, by all means, go for it.  This can improve your score in the long term but may not be a good idea if you are within a few months of making a big credit purchase like buying a home or car. Every time you request a credit increase, you may be initiating a hard credit pull, which can damage your score in the short term. 
2. Try not to utilize too much at a time. You should try to keep your credit utilization relatively low, especially right before you apply for a mortgage. One thing you may not know is that credit utilization is tracked and reported per card. So, if you have your utilization spread around between cards, but relatively low for each, that is not so bad. But if you try to move it all to one card for convenience, you suddenly have high utilization on that card. That can ding your credit score. It’s an easy mistake to make, but also easy to avoid once you are aware.
3. Do not use a large number of revolving cards before applying for new credit. Many consumers use several different credit cards each month to take advantage of specials, points and rewards. Too many accounts being utilized at the same time can lower your score.  Before applying for a major credit purchase consider paying off all small balances and using one revolving account exclusively until your new home or car purchase is complete
4. Always pay on time. Did you know missing even one timely payment can reduce your credit score? A lot of people think, “it will be okay if I miss just this one, I’ll catch up next month.” But it’s not without consequences.
5. Don’t cancel your old cards. You may be tempted to cancel old credit cards you are not using anymore just to clean things up and simplify your financial life. But cancelling those unused credit cards can reduce your credit diversity and credit age, which can adversely impact your score. It is better to keep your old cards.
6. Regularly check your credit report. Now and again, you should order your credit report to see what’s in it. You can do this for free each year one time with each of the major bureaus (Experian, Equifax, and Transunion). The reason you need to do it is because mistakes in credit reports are rampant, and can harm your score. Submitting corrections can make a surprising difference. But if you don’t check, you’ll never know.

Apply for a Mortgage With or Without Perfect Credit

During your consultation, Blue Square Mortgage can give you suggestions for improving your credit score before you apply for a mortgage. But we also work with low credit buyers to find solutions to purchase a home. To get started, please give us a call at (206) 352-6453. We can help you buy a home in Washington State or Colorado.