Buying a home is always a very big and important decision. When you are looking for your next home, making sure that you will qualify for the best possible mortgage is a great idea. To get the best deal, you will need to make sure that your credit is in good order before you try and buy the property. Remember a better credit score means a lower interest rate and even a half percent can make thousands of dollars difference on a mortgage. There are five things you can do to make sure your credit score is as good as possible when you are ready to start house shopping.
Get Credit Report and Score
The first step is getting your credit score ready is to pull your credit report and score. You can either do this on your own by pulling a report from the major credit bureaus or by getting one provided by a trusted mortgage broker. This report will give you your current report an aggregate score based on your credit history. Ideally, you should do this several months before you start applying for a loan.
Look for Errors
Once you have your report, the first thing you should do is look for errors. If you notice that there are accounts in your name that you have never opened, it could be a red flag for identity theft. You should then call each of the creditors to have these accounts closed and the information removed from your account.
Make Immediate Improvements
You should also review your report to find ways that you can immediately improve your credit score. Having negative and inaccurate information removed will give your score a very big boost. However, you can also improve your score by paying down credit card balances. Credit card utilization rates are a big factor that goes into your overall score. By paying down your balances you could see an immediate improvement in your score.
Bring Accounts Current
If you have accounts that are past due, it is important to bring them current as soon as possible. Actively past due accounts will be a big red flag with any lender. Having these accounts brought current will improve your score a bit and will also show that you are in good standing with all lenders.
Be Prepared to Discuss
Finally, you should be prepared to discuss your credit report and score. If you have some questionable accounts or a mediocre payment history, your lender will likely want you to provide more detail. Having a well prepared response could improve your chances of being approved for the loan.
While it is important to check your score before applying for a loan, you should continue to monitor your credit going forward. Following good credit practices will go a very long way and be beneficial in the long term.
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