Many do not understand the importance of a credit rating which can affect their ability to get the best mortgage rates. If you have large credit card balances, too many accounts, or have failed to make certain payments, you probably have strikes against your credit score.
Here are some credit management tips to make sure you get the best mortgage rate possible.
Get a copy of your credit report.
You need to know what your credit problems are before you can start repairing credit. You can receive your free credit report by mail or order online at TransUnion here or Equifax here.
You should check your report carefully. Are there any errors? Be sure to contact Equifax or TransUnion to have them corrected.
Make your payments on time.
Always, always pay your credit cards and other obligations when due and this includes your cell phone bill. The collections remain in your file for six years. Even after paying them, they will not go away.
Focus on your payment amounts.
If you cannot pay the balance in full, be sure to pay at least the minimum payment required. Paying more will save you interest costs.
Have a buffer between limits and balances.
Know the limit of your credit cards and try to stay as low as possible. The higher your balance, there is an increasing negative impact on your credit score. Try a balance that does not exceed 30% of your limit.
Limit your credit cards.
Try not to have more than three credit cards. Use them occasionally and pay them quickly. Keep your oldest and most open account open, even if you no longer use it because it is an important part of your credit history.
Avoid asking for a credit.
Pay attention; requesting new credit can harm your credit report. If you are making tariff purchases, be sure to shop for a targeted period of time (maximum 15 days recommended).
Build a credit history.
Some people think they have a lot of credit because they never needed or used a loan or credit card. Unfortunately, this is incorrect. Someone who has no credit history is generally considered more risky than someone who has credit and manages it responsibly.
If your debts exceed you, contact your creditors and set up a payment plan with them. They want to know that you are worried and take it seriously. This can help avoid collections that will have a negative long-term impact on your credit.
Credit cards can be a trap. Ask yourself “do I really need this?” Before buying if you use credit.
Protect your credit.
It’s your passport to a financial opportunity. You will be rewarded with better rates and faster approvals.
If you are someone who monitors your credit score, this is great. The scores available in some of the online services are a great reference, but those scores are now what we use for mortgages when a lender assesses your qualifications for a mortgage.
Sometimes the score of the lender and the mortgage broker can differ significantly from the score you see as a consumer, as we use a system that includes many more variables to determine the Fico score used for mortgages.
As your mortgage broker, I will do a full credit check and let you know if there are any areas that need to be worked on before applying for mortgage financing.
Sometimes a few simple steps can significantly improve a credit score, so please contact us to see if you need to do a little bit of work on your credit in order to qualify for a mortgage.