When you are trying to qualify for a competitive home loan, one of the most important things you can do is protect your credit score. In order to do that, you need to avoid common pitfalls which can reduce your credit score while you’re shopping for a home and selecting a mortgage. The following mistakes are easy to avoid. We will tell you how.
1. Shopping for a loan before looking at your credit score and report.
The only way to know what types of mortgage offers you are likely to receive is by being aware of your credit score. This also is vital if you want to make sure that the interest rates you are being quoted for a home loan are fair and affordable.
Once you have looked at your credit score, you also should order your free credit report from Experian, Equifax or TransUnion. The information in your credit reports goes into calculating your score.
Viewing your reports allows you to see if there are any damaging errors. Such errors are startlingly widespread, so checking is just the smart and responsible thing to do. You should not be cheated out of a better loan offer by somebody else’s mistake.
2. Closing old accounts.
While working on improving credit, it is common for borrowers to work toward paying off outstanding credit balances. Once the balances read zero, the thought of closing those accounts could feel liberating.
But you should not do so until after you have successfully applied for a mortgage and selected an offer to sign on. That way, you both maintain account diversity and also hold onto aged accounts which can keep your credit score high. Later, you can close the accounts if you wish.
3. Allowing lots of hard credit checks.
When applying for loans, avoid hard credit checks when you can. Hard credit checks damage your credit score, whereas soft credit checks do not. Some people advise avoiding applying for new credit at all during this timeframe in order to steer clear of hard credit checks. But applying for credit or loans is fine so long as only soft checks are run during the process.
4. Utilizing too much credit while applying for a mortgage.
The lower your credit utilization is, the higher your score should be. So, think carefully about any big purchases you are thinking about making (i.e. new furnishings). If you can cover these expenses out of pocket or delay them until after the loan process, you can maintain your lower credit utilization and your higher score.
5. Missing opportunities to raise your score.
Do not talk yourself out of trying to raise your credit score right before applying for a mortgage. Many consumers miss out on opportunities to boost their credit scores, thinking that it is simply too late in the process to do anything about low scores. But it is worth it to put in the extra effort. It could save you a lot of money over the long run by helping you qualify for lower interest rates.
Texas Property Lending Can Offer Credit Advice and Guidance
At Texas Property Lending, we receive a lot of questions about credit. During your consultation, we can tell you how your credit score may impact the loan offers you qualify for. We also can give you guidance in how you can raise your score even if you are on a brief timetable. To get started, please call us today at (713) 955-5626. Whatever your score, we look forward to matching you with a competitive mortgage in Texas.