Credit Score Tips

    If you are buying a home in the near future, you’ll want to check your credit score and know where you stand before you apply for a mortgage. Here are a few tips to help you:

    1. Check your credit report. You can request a free copy of your credit report annually, and check it for errors. Make sure there are no late payments incorrectly listed and eliminate mistakes. Dispute any errors with the credit bureaus. You can get one free credit report from each of the three major credit bureaus (TransUnion, Equifax, and Experian) once every 12 months from annualcreditreport.com. However, this site doesn’t provide credit scores, or more specifically FICO® Scores.
    2. Stay current on all your bills. One way to make this easier is to set up automatic payments or payment reminders. Make your payments on time as this is a huge determinant on your credit score.
    3. Don’t close old accounts. I know this may sound counterintuitive, but don’t close old credit cards even if you’re not using them. Age of credit history matters, and even if you’re not using a card it will count in a positive way on your credit. Use old cards occasionally to buy small things just to keep the line active, then pay them off promptly.
    4. Use a variety of different credit types. Lenders like to see a diverse line of credit being use – from auto loans to credit cards and other accounts. We’ve seen buyers denied a mortgage specifically because they don’t have open “trade lines” or haven’t established a track record of paying credit. This is one time where paying your bills in cash can actually hurt you.
    5. Don’t max out your credit cards. Pay down your cards to below 30% of your credit line or less.
    6. Don’t apply for more credit if you’re also applying for a mortgage. If a lender sees too many inquiries on your credit report, it’ll look like you’re shopping for money and may hurt your score. Don’t open store cards or more credit card accounts at this time.
    7. Monitor your credit score. Many credit cards now automatically give you your score update monthly. Check your credit card statements or log in there online to see if that’s one of your card benefits. You can also set up a free account at Credit Karma which gives you free access to credit score monitoring.

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