Your credit score is a key factor in the mortgage application process. Having a good credit score can mean the difference between getting approved for the mortgage you're after and living in an overpriced apartment. Credit scores are still a mystery. Even if your credit score is known, it's possible to be unsure about its outcome. There are steps that you can take in order to improve your score.
Request a Free Credit Report
An important step in the process of getting a home loan is to obtain a free credit report. This report will show you your credit score and any past mistakes. Before making any major purchases, you should request a free credit report within six months. Rebuilding your credit can take a while.
You can request the report directly from the federal trading commission or by post. It will take approximately 15 days for the report to be processed. To request the report, you should use the Annual Credit Report Request Form. A free credit report can be obtained from any of the major credit bureaus.
Calculating your mortgage score
The two most important factors in mortgage credit scores are credit utilization and payment history. While late payments can damage your credit, making all your payments on time will improve your score. Credit utilization compares your total amount of debt to the amount of credit you have available to you. If you have $1,000 in credit but only $500 available, your credit utilization ratio is 50%. A credit utilization rate of 30% is the ideal.
Although credit scores are determined by lenders using slightly different methods, the basic factors remain the same. A mortgage lender's credit score will be much lower than your own. Regular credit checks are an important step to improving your credit score.
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 they won't prevent criminal activity or identity theft, these services can alert you to suspicious activity. This is a great benefit when you are about to make a major purchase.
Credit monitoring services are commercial services that scan your credit reports and alert you to any changes. The Federal Trade Commission estimates that identity theft and fraud are on the rise in America. A credit monitoring program can help you find unauthorized credit modifications in your credit reports. There are both free and paid credit monitoring services available, and you can choose the one that best fits your needs.
Getting a lower mortgage credit score
Before applying for a loan, you should be aware of your mortgage credit score. Low credit scores are a sign of financial trouble. Adding another mortgage to your debt pile is not a wise idea. Lenders will charge higher interest rates for mortgages with lower credit scores. You should wait for your credit score to improve before applying.
Your credit score can be improved by paying off your debt. Paying off your credit card debt can help you lower your debt and increase the equity in your home. This will increase your credit score before applying for a mortgage.