5 Tips to Improve Your Credit Record Before Applying for a Home Mortgage
February 26, 2013
Families and individuals that are currently in the home mortgage market should consider their credit record before the application process. During this time, the designated mortgage lender will be examining credit finances. In order to secure a home mortgage it is essential that credit scores maintain a high status. FICO scores, also known as credit bureau scores, are provided to mortgage lenders by leading credit agencies. These scores act as a guide in order to obtain a home mortgage approval, and they are essential for measuring a person's credit.
Repairing a credit score requires a consistent effort on an individual's behalf. The only rapid way to repair a credit score is to pay back debt and eliminate negative information from your credit report. While this solution may be fundamental, there are plenty of other options available to help individuals improve their credit record, to successfully obtain a home mortgage. The road to a better credit record begins by developing and initiating a plan to increase your credit score.
Credit Record Improvement Tips
- Develop a Positive Payment Reputation - During the home mortgage application process, mortgage lenders will be analyzing your payment history. Paying bills on time is a crucial part of credit reputation. Late payments diminish credit scores, damaging your chances of obtaining a home mortgage. In the event where payments to bills cannot be completed, alert creditors in advance. In many cases, payment arrangements can be negotiated. This will benefit credit records by withholding minor quantities of late notations so that credit scores are not entirely damaged. If the situation gets out of control, consult a legitimate non-profit credit counselor. Also, avoid quick fix credit companies that promise immediate poor credit reversal.
- Maintain Low Debt - Before searching for a mortgage lender, ensure that all credit card balances are kept at a minimal balance. Instead of moving the debt to other cards, pay them off. Having fewer accounts that average out equal balances is better than completely maxing out one account. Do not close any unused accounts, these zero balance accounts can work in your favor when applying for a home mortgage.
- Length of Credit History - When considering a home mortgage, time is the most valuable asset to improving credit. Managed properly, extended credit history can raise your credit FICO score by 15% every month. Mortgage lenders take into account the amount of time and status of open credit accounts.
- Beware of New Credit - Opening new credit could lower your credit score, so proceed with caution if you're applying for a home mortgage. Applying for new credit causes credit inquiry, this can remain on credit reports for 2 years. Instead, remain faithful to your current credit by paying off debts on time.
- Be Smart About Types of Credit - Mortgage lenders view a diversity of credit as a wise investment. This is because 10% of the FICO credit score derives from the various types of credit an individual may obtain. Owning only one source of credit, such as credit cards, may restrict credit scores. Try obtaining a variety of credit lines such as installment loans and loans with fixed payments. By managing them properly, they can enhance your credit score improving your chance for a home mortgage.
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