Credit scores, along with your overall income and debt, are a factor in determining if you’ll qualify for a loan and what loan type you can qualify for.
- Check for and correct errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management.
- Pay down credit card bills. If possible, pay off the entire bill every month. However, transferring credit card debt from one to another could lower your credit score.
- Don’t charge your credit cards to the maximum limit.
- Wait 12 months after credit difficulties to apply for a home loan. You may be penalized less for problems after a year.
- Before you buy your new home, don’t order items for the home on credit, such as appliances and flooring, until after your loan has closed. The amounts will add to your debt and can negatively impact your loan at the last minute.
- Don’t open new credit card accounts before applying for a new mortgage. Having too much available credit can lower your credit score.
- Shop for mortgage rates all at once. Too many credit applications can lower your score, yet multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.
- Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.