Things To Do And Not Do With Your Credit When Applying For A Mortgage Loan

Posted on: 22 June 2016

Getting a mortgage requires a lot of different steps, and one of these steps involves a credit check. When you apply for a mortgage loan, the lender will need to verify your credit score before approving your loan. If you want the best mortgage rate possible, you will need to make sure your credit is as high as it can be, and there are certain things you should do and shouldn't do relating to your credit before you apply for a loan.

Things you should do

One thing you should realize is that your lender might pull your credit report two times. Once will be to preapprove your loan, and the second time will be right before you actually get a loan. If your credit is great when they initially pull the report, you might qualify for a really low interest rate, but if your credit significantly worsens by the time they pull the second report, you might not even qualify for a loan. To make sure your credit is as high as possible, you should do the following things:

  • Reduce the debt you owe – Paying off debt frees up available credit, and this will help your score increase.
  • Pay all bills on time – Your payment history can help or hurt your score, and paying all your bills on time will only help.

These two factors can help your score, but there are many things that can hurt your score.

Things you should avoid

You will need to avoid doing anything that may hurt your score. Here are some of the things you should not do during this time:

  • Make a major purchase – A major purchase will show that you owe more money, and this can harm your credit score initially.
  • Apply for lines of credit – Each time you apply for credit, the lender will pull a credit report. This will result in a hard inquiry on your credit report, and hard inquiries pull down credit scores.
  • Use your credit cards – Using your credit cards will increase balances, and this increases your debt utilization rate. Keeping your debt utilization rate low will help your credit score stay higher.

The loan process is complicated and involves so many different factors, and controlling your credit score is something that can help you qualify for a great loan. To learn more about loan programs and how your credit score will affect your ability to get a loan, contact a mortgage company today.