Lenders will consider your credit score when considering mortgage applications. Having a good credit score can mean the difference between getting approved for the mortgage you're after and living in an overpriced apartment. Still, credit scores are somewhat mysterious. Even if you do know what your score is, you may still be uncertain about the outcome. There are some steps you can take to improve your score.
Getting a free credit report
An important step in the process of getting a home loan is to obtain a free credit report. It will help you to see your credit score and any mistakes you may have made. A free report should be requested at least six months in advance of making large purchases. It can take quite a while to get your credit rating back on track.
You can either request the report at the federal trade commissioner or send it in the mail. The process will take around 15 days. To request it, please use the Annual Credit Report Demand Form. You can also request a free credit report at any major credit bureau.
Calculating your mortgage score
Two factors play a significant role in your mortgage credit score: credit utilization, and payment history. You can hurt your credit by late payments, but paying all of your bills on time will help you improve your score. Credit utilization is your ratio between the total amount of debt you have and the credit you have. A $1,000 credit line with $500 remaining is a 50% credit utilization rate. The ideal credit utilization rate is 30% or lower.
Although different credit scoring methods are used by lenders, the core factors remain the exact same. Your credit score from a lender for mortgages will be substantially lower than your free credit score. Checking your credit report on a regular basis is an important step in improving your credit score.
Getting a credit monitoring service
A credit monitoring service, which can keep you informed about your credit score and help you increase your chances for approval when you're looking to get a mortgage. Although these services can't stop identity theft or criminal activity they can alert to potential fraudulent activity. This provides peace of mind when you're making a major purchase.
Credit monitoring is a service that monitors credit reports, alerts you to potential changes and scans them for fraud. The Federal Trade Commission estimates that identity theft and fraud are on the rise in America. A credit monitoring service will help you detect unauthorized changes in credit reports such as new loans or credit cards. There are both free or paid credit monitoring options, so you can choose the one that suits your needs best.
Getting a lower mortgage credit score
Before you apply for a loan, it is important to know what your credit score on mortgages is. If your credit score falls, it could indicate that you are having financial problems. You should avoid adding another mortgage onto your existing debt. Lenders will charge higher interest rates for mortgages with lower credit scores. You should wait for your credit score to improve before applying.
You can improve your credit score by reducing your debt. Your credit card balances can be paid off to lower your debt usage and increase equity in your house. This will increase your credit score before applying for a mortgage.