You Are Judged By Your Credit Score
It’s sad but it’s true; in the financial world you are judged by a three-digit number, your credit score. That score is used by financial institutions to determine the potential risk your financial habits bring to the table. This includes mortgage companies, insurance companies, landlords and even cellular phone companies. When you are thinking about buying a house the most important financial institution you care about is a mortgage lender.
Review Credit Score Before Applying
Looking for a home loan is a stressful process, you can ease the stress load by going into the process with a good credit score. Credit scores range from 300 to 850. The higher your credit score the more likely you are to qualify for a loan at a low interest rate. Not quite there yet? There are ways to quickly boost your score.
#1 – Review Your Score
Before you even apply for a home loan check your credit report for accuracy. Credit reporting agencies do not confirm that the information they receive is accurate, they just report what they receive. It is your job to confirm the accuracy. There may be accounts on your report that are not even yours, late pays that actually never occurred or old debts that still show up as outstanding (collection agencies can sometimes be a bit slow at reporting updates).
#2 – Stop All Activity
After you apply for a loan stop spending, stop borrowing. A mortgage company wants to make sure they receive their money from you. They are in the business of lending money out and receiving it back. They are not in the business of foreclosing and building up an inventory of houses. If you are overburdened with other debts they are concerned that you will be unable to make your monthly mortgage payment on a timely basis. They do not want your home, they want your monthly mortgage payment. They can gauge you by your credit score. You will do wonders to your credit score if you keep your balances low.
#3 – Spread It Around
Paying down your debt as quickly as possible is the fastest way to show the mortgage company you are serious. But if you have a lot of credit card debt that you cannot pay off quickly try spreading around the balances. Your goal is to keep your credit card balances away from the maximum card limit. You can accomplish this by transfering balances that are close to maxing out to your other cards.
It is your best interest to improve your credit score before you lock into a mortage You will be paying off your mortgage for a very long time, start out the right way by qualifying for the lowest interest rate possible.