It goes without saying that your credit plays a vital role in qualifying for a mortgage, but do you really know what’s on your credit report? Many people haven’t had or needed the opportunity to see what’s on their credit report and it can come as a last minute surprise and obstacle when there is outdated or erroneous information on it. Getting a copy of your report from sources like www.annualcreditreport.com is a safe and free way to see if there’s anything that needs to be addressed.
Here are a few things to avoid when utilizing credit before and during the mortgage application process…….
- DON’T APPLY FOR NEW CREDIT OF ANY KIND. Each inquiry on your credit report can take a couple of points away from your score. Inquiries for a mortgage do not have the same affect, however, and many lenders will discourage you from other lenders pulling your credit. That is not the case. The computer systems at the major credit reporting agencies were designed to recognize that you’re shopping for a mortgage and allow you to have several inquiries from lenders to get the best rate and closing costs. In the meantime, stay away from applications for credit cards, car loans and any other credit.
- DON’T LET YOUR BALANCE GET TOO CLOSE TO YOUR LIMIT. Maxing out your credit cards or even getting close to that limit is a sign of irresponsible use of credit. You may be on time every month, but the fact that you’re using so much of your credit on a regular basis puts a strain on your credit score. Keeping balances at 75% or less of your available limit will keep your credit score in a good and qualifying range.
- DON’T CANCEL CREDIT CARDS. Many people think that cancelling a credit card that has no balance will look like they have less credit available to them, when in fact, it increases the amount of credit they are utilizing. If you have two credit cards with limits of $5000 with one being maxed out and one having a zero balance, you’ve used 50% of your available credit. Cancelling the one with no balance leaves you with 100% of your credit accessed. This will hurt your credit score.
- DON’T SKIP PAYMENTS ON ANYTHING. Even if you expect to pay something off as a result of your mortgage application, whether as part of your purchase or paying off with a refinance, anything can happen to delay your closing and if that means a delay in paying an account, your credit score and qualification can be jeopardized.
- DON’T MAKE A LARGE PURCHASE AFTER YOUR INITIAL APPROVAL. Receiving your initial approval is only part of the approval process. There are still other steps to be taken to get your mortgage to the closing table and one of those items is called a “credit refresh.” Although it won’t show up as an inquiry, your lender will take another look at your credit report to ensure that you’ve kept up on your payments and haven’t run up any new debt. Doing any of this can affect your score and qualifications for the mortgage. Buy that new living room or bedroom set after the closing.
Being armed with this information should help you to get and maintain the credit score necessary to be qualified for a mortgage and obtain the best rate possible. If you find that there is outdated or erroneous information on your credit report, consult a credit repair professional or your mortgage originator.
Thank you to Rick Masynk, branch manager of Network Funding in North Smithfield, RI. Rick has built his reputation as a knowledgeable, professional, proven resource to the Real Estate Professionals throughout Rhode Island, Massachusetts and Connecticut by providing top quality service to all of his clients. He works with prospective homebuyers to custom tailor a financing package to maximize their purchasing power and achieve their long and short term goals, and is thoroughly trained and knowledgeable in all aspects of real estate financing.
Branch Manager NMLS# 8621 at Network Funding, LP #2297
Massachusetts Mortgage Broker License #MC2297
Massachusetts Mortgage Lender License #MC2297
621 Pound Hill Rd, Suite 103
North Smithfield, Rhode Island 02896
Licensed to do business in CT, MA, & RI
Rhode Island Licensed Lender
In Connecticut: Network Funding, Limited Partnership
Equal Housing Opportunity
- NMLS#: 8621
- Email: firstname.lastname@example.org
- Phone: (401) 651-2716