As a mortgage broker, it is my business to help you get the best rate and terms for your mortgage.
Many don’t understand the importance of a credit rating that can affect their ability to get the best mortgage rates. If you have large credit card balances, too many accounts or have missed making some payments, you probably have some strikes against your credit score.
Here are some credit management tips for making sure that you get the best possible mortgage rate.
Get a copy of your credit report.
You need to know what your credit issues are before you can begin to work on credit repair. You can receive your credit report for free via mail or order on-line from TransUnion here or from Equifax here.
You should check your report carefully. Are there any errors? Be sure to contact Equifax or TransUnion to have these corrected.
Make your payments on time.
Always, always pay your credit card(s) and other obligations by their due dates and that includes your cell phone bill. Collections stay on your record for six years. Even after you pay them off, they will not disappear.
Focus on your payment amounts.
If you can’t pay the balance in full ensure that you pay at least the minimum payment required. Paying more will save you interest charges.
Have a buffer between limits and balances.
Know the limit on your credit cards and try to keep as far below that limit as possible. The higher your balance, there is an increasing negative impact on your credit score. Try for a balance that is no more than 30% of your limit.
Limit your credit cards.
Try to have no more than three credit cards. Use them occasionally, and pay them off promptly. Keep your oldest and most established account open, even if you no longer use it as it’s an important part of your credit history.
Avoid applying for credit.
Be careful; applying for new credit can hurt your credit report. If you are rate shopping, make sure you shop during a focused period of time (recommended 15 days maximum.)
Build a credit history.
Some people think they have great credit because they have never needed or used a loan or credit card. Unfortunately, that is incorrect. Someone who has no credit history is usually viewed as riskier than someone who has credit and manages it responsibly.
If your debts get ahead of you, contact your creditors and work out a payment plan with them. They want to know you are concerned and take it seriously. This can help avoid collections which will have a long term negative impact on your credit.
Credit cards can be a trap. Ask yourself “do I really need this?” before purchasing if you are using credit.
Protect your credit.
It’s your passport to financial opportunity. You’ll be rewarded with better rates and faster approvals.
If you are someone who monitors your credit score that’s great. Scores available at some of the online services are a great reference but these scores are now what we use for mortgage lending when a lender assesses your qualifications for a mortgage.
Sometimes the score at the lender and mortgage broker side can differ significantly from the score you see as a consumer as we use a system that includes far more variables in determining the Fico score used for mortgage lending.
As your mortgage broker, I will do a full credit review and let you know if there are any areas that need to be worked on prior to applying for mortgage financing.
Sometimes a few simple steps can greatly improve a credit score so please reach out to see if you need to do a little work on your credit in order to qualify for a mortgage.