Posted on: 3 March 2017
As you start planning to buy a house, there may be some work you will need to do to be fully prepared when you walk in the bank to apply for a loan. One of the big things you should consider is checking your credit report and finding ways to improve your score. Your credit score will play a large role in the interest rate you get on your home loan, which is why you should do all you can to make sure it is as high as possible before you apply for a loan.
Pay Off Debt
The amount of money you owe on your credit cards compared to their limits carries a huge weight on your credit score, and this is calculated with credit utilization rate. Credit utilization rate simply compares the amount of credit you are using on a credit card to the amount of your credit limit. If you can pay off your credit cards, it will reduce your credit utilization rates, and this will cause your score to increase.
Do Not Apply For Any Credit
It's also important to avoid applying for any type of credit that would result in a hard inquiry on your credit report. A hard inquiry is something that occurs when a creditor runs your credit report as a way of determining whether to approve you for a loan or not. Each time this happens, it can cause your score to decrease, which is why you should avoid this.
This means that you should not apply for any credit cards, car loans, or personal loans. You may also want to avoid requesting insurance quotes, as this too may result in hard inquiries on your credit report.
Wait For Things To Drop Off
If you have something negative on your credit report, it's likely to fall off the report after 7 to 10 years from the time it was recorded. If you are approaching the 7- or 10-year period, you may want to wait for a little while before you apply for a loan. When negative accounts and reports fall off a credit report, it will cause the person's score to increase. If your negative reports will not fall off soon, you may not want to wait for the time frame it would take, though.
Having a great credit score will offer you a better home loan. To learn more about the home-loan application process, talk to a lender like Financial One Mortgage today.Share