Your credit score can be your best friend or an enemy when searching for a home loan. Mortgage lenders use the credit score to determine what kind of credit risk you will be. The LOWER your score, the bigger risk the lender see you as and the HIGHER interest rate you will pay.
Fixing a bad credit score can take time. But the following tips can produce improvement:
1. Pay credit cards on time each month. Late payments really damage your credit score. Negatives usually stay on your credit report for 7 years but consistently paying bills on time can make a modest improvement.
2. Do not charge to your limit on your credit card. Not only is that a risk of not being able to pay on time, but the higher percentage of credit you have tapped, the lower your score will drop. Better to have 2 or 3 cards with smaller balances that be maxed out on one.
3. Keep zero balance due credit accounts open – even if you do not use them often or at all. Closing accounts decreases the amount of credit available. Closing accounts may also decrease the average age of your accounts which also lessens a credit score.
4. 6 months before applying for a home loan, do not apply for new lines of credit. Applying for lines of credit generates a creditor inquiry on your credit report which may also lower your score.
5. Check your credit report for errors. Go to annualcreditreport.com and get a free report one time a year. There may be ways you can correct or dispute errors.
Do you know your credit score? I do not, but I am going to to look at my credit report above……
OK, I’m back! I went to the linked site above and you have to fill in the usual info. Rememmber, you don’t have to buy anything if you do not want to. (and I did not) Then you are directed to select one of three reporting agencies. Answer a few more questions. Then you get to see how you did- if you have any negative events, how many accounts you have and are they in good standing. Took a few minutes but I left feeling good! Give it a try.
Information taken from Anchor Bank publication.