Cleaning up your Credit Score

Home loans can be a daunting task. From understanding your credit score, debt to income ratio, PMI’s, closing costs… there are so many layers involved when getting a loan.

Some real estate agents may even require you to have a pre-approval letter before you even begin the house hunting process! While this may sound like an annoyance, I promise it’s in your overall best interest. One, so that you don’t fall in love with a house you cannot afford, and it also legitimizes potential offers which can set you apart in a bidding war.

So, let’s discuss a few key things you can do to increase your odds for approval. Your credit score makes a huge impact on your approval chances… it shows the lender a complete overview of your financial history and if you are a good investment or not. Do you make your payments on time? Do you overspend? Do you use more than 30% of your available credit? If you do any of these things you may need to re-evaluate your spending habits before you commit to a mortgage. Cleaning up your credit score is easier than it sounds if you lay out a plan and commit to it.

Don’t open a new credit card, this affects the lifetime length of your credit history and raises a red flag to lenders on how you will use this new credit.

Do set up automatic payments. I know life is super busy, and we forget things a LOT. Automatic payments ensure that your bills are paid on time and prevent any potential oversights and late payments, fees, and derogatory remarks to your credit score.

Don’t buy a new car right before your house closes. Just because you’ve already been approved for the loan does not mean that it is a done deal. I’ve seen buyers go out the day before their closing and buy a brand new vehicle… this affects your credit score (which we have to check one last time before the loan is official ) and can delay or even terminate the loan.

Don’t cancel old credit cards or debts. It looks better on your report to have open lines of credit that you don’t use than it does to have paid off, closed cards.

If you have any questions about improving your credit score, pre-approval questions, or want to talk about a refinance call me at 843.839.9001! I’d love to help!

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