How to Boost Your Credit Score Before Applying for a Mortgage

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If you are planning to buy a house very soon, it is a good idea to pause and check your credit score before submitting any application documents.

Your credit score plays a huge role in the interest rate you’ll receive when applying for a mortgage – this doesn’t just apply to home loans; the same goes for personal loans, credit cards and any other form of credit.

National mortgage rates can fluctuate and are usually a good benchmark for what your rate will be at that time, but the best way to get a more accurate reading of your rate is to apply or get a pre- approval. Before you do that, you should do what you can to improve your credit score if you think it’s less than ideal.

So Select has put together some tips to keep in mind when it comes to improving your credit score. Remember that improving your credit score doesn’t happen overnight and it can actually take several months of healthy credit habits to start seeing changes, depending on what happens. found in your credit profile.

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1. Continue to repay your monthly debts on time

Paying your bills on time is the most important thing you can do to increase your score. That’s because payment history makes up 35% of your FICO® score, making it the most influential factor in determining someone’s credit score. For lenders, a person’s ability to meet their credit card payments indicates that they are capable of taking out a loan and repaying it.

But your credit score isn’t just influenced by your credit card bills. You must pay all your bills on time. This includes all of your utilities, student loan debt, and any medical bills you may have.

Missing a payment or making a late payment is actually easier than you think. When life gets really busy, your credit card bill or loan due date can easily slip away. That’s why experts recommend using automatic payment or setting up automatic transfers from your bank account to your bills. This way, you don’t have to remember to manually make payments. This reduces the likelihood of you incurring a missed payment, which can hurt your credit score.

2. Don’t open too many new lines of credit at once

FICO and VantageScore consider the number of credit inquiries (such as requests for new financial products or requests for credit limit increases) as well as the number of new credit accounts a person opens. Every time you apply for a new credit card or loan, the lender does a thorough investigation of your credit report, which “rings” your credit and may temporarily lower your score.

That being said, applying for multiple new lines of credit in the same amount of time can seriously hurt your credit score, so make sure that if you decide to go ahead with applying for credit, it’s absolutely crucial for your financial situation. health. You should give up opening new lines of credit at least a few months before applying for a mortgage.

Keep in mind that when applying for a mortgage, it is strongly recommended that you seek out the best rate by submitting your application for pre-approval to several lenders, which means, yes, they all carefully review your credit profile. However, with mortgages in particular, you can have your credit report removed as many times as needed without further damaging your score as long as it is within a 45 day window.

Some lenders speed up the pre-approval and application submission process so you can quickly figure out where you stand. Ally Bank is known for offering a mortgage pre-approval in as little as three minutes (and you can potentially submit your full application in as little as 15 minutes). SoFi, which has a completely online mortgage application process, offers quick pre-qualification and even gives borrowers access to mortgage loan officers for slightly more personalized answers to their questions about the process.

Allied bank

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed and adjustable rate mortgages included

  • Types of loans

    Conventional Loans, HomeReady Loan and Jumbo Loans

  • Terms

  • Credit needed

  • Minimum deposit

    3% if you continue with a HomeReady loan

Advantages

  • The Ally HomeReady loan allows a down payment of just under 3%
  • Pre-approval in just three minutes
  • Submission of the application in less than 15 minutes
  • Online support available
  • Existing Ally customers are eligible for a discount that applies to closing costs
  • Does not charge lender fees

The inconvenients

  • Does not offer FHA, USDA, VA or HELOCs loans
  • Mortgages are not available in Hawaii, Nevada, New Hampshire or New York

SoFi

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed and adjustable rate mortgages included

  • Types of loans

    Conventional loans, jumbo loans, HELOC

  • Terms

  • Credit needed

  • Minimum deposit

Advantages

  • Quick pre-qualification
  • Provides access to mortgage officers for advice
  • $500 off for existing SoFi members
  • Interest rate deduction of 0.25% when you lock in a 30-year rate for a conventional loan
  • Offers up to $9,500 cash back if you buy a home through the SoFi Real Estate Center

The inconvenients

  • Does not offer FHA, VA, or USDA loans
  • Mortgages are not available in Hawaii, New Mexico or New York

3. Keep your credit utilization rate low

Your credit utilization rate is the amount of credit you have used divided by your total available credit. For example, if you spent $5,000 on a credit card with a credit limit of $10,000, your credit utilization rate is 50%. Experts generally recommend keeping your total usage below 30%, and below 10% is even better.

One important way to keep your usage low is to keep making on-time monthly payments on your credit card balances (while keeping new spending as low as possible, of course). If you can’t afford to pay off your credit cards in full each month, you’ll just have to be patient and consistent with your monthly payments.

Additionally, you might also (thoughtfully) consider opening a credit card with a 0% APR introductory period if you already have a lot of credit card debt (as long as you don’t already open too much new lines of credit). These credit cards offer an initial term usually of 12 months or more during which you will not be charged interest on your monthly payments. You can therefore transfer an existing balance on this credit card and possibly pay it off during this initial period.

This can be extremely useful if monthly interest charges prevent you from reducing your debt balance. Select rated the U.S. Bank Visa® Platinum Card and the Citi Simplicity® Card among the best interest-free introductory cards for balance transfers and new purchases.

U.S. Bank Visa® Platinum Card

On the secure site of US Bank

  • Awards

  • welcome bonus

  • Annual subscription

  • Introduction AVR

    0% for the first 20 billing cycles on balance transfers and purchases

  • Regular APR

    15.24% – 25.24% (Variable)

  • Balance Transfer Fee

    Either 3% of the amount of each transfer or $5 minimum, whichever is greater

  • Foreign transaction fees

  • Credit needed

Citi Simplicity® Card

  • Awards

  • welcome bonus

  • Annual subscription

  • Introduction AVR

    0% for 21 months on balance transfers; 0% for 12 months on purchases

  • Regular APR

  • Balance Transfer Fee

    5% of each balance transfer; $5 minimum

  • Foreign transaction fees

  • Credit needed

You may also consider asking your credit card issuer to increase your credit limit. This increases your total available credit and reduces your utilization rate. Many issuers will give you a limit increase if you’ve had your card for a while and made your payments very well on time.

4. Dispute any credit report errors

Whether or not you’re trying to boost your credit score to prepare for mortgage applications, it’s always a good idea to monitor your credit reports for any inaccuracies – including instances where lines of credit have been taken out on your behalf. name you weren’t aware of.

This can be a very serious problem, especially since inaccuracies and lines of credit that you were unaware of can lower your credit score by contributing to your utilization rate and debt ratio.

You might think it seems unlikely that an error could be made on one of your credit reports, however, 26% of participants in a Federal Trade Commission (FTC) study found at least one error on their reports which could make them seem more risky to lenders.

According to My FICO, common errors occur when someone applies for credit cards under different names, if a clerical error is made when information is entered from a handwritten application, or if information from an ex -spouse still appear on your report. If you spot an error, then you should gather all supporting evidence and dispute the error online or over the phone to the respective office that issued the incorrect report.

You can use Experian, or another credit monitoring service, to easily dispute any errors and monitor your credit with each of the three major credit bureaus (Experian, Equifax, and TransUnion). You can also receive free annual credit reports by visiting annualcreditreport.com.

Experian Dark Web Scan + Credit Monitoring

On Experian’s secure site

  • Cost

  • Credit bureaus monitored

  • Credit score model used

  • Dark web analysis

  • Identity Insurance

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

About Wanda Wall

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