Potential homebuyers need to know that you MUST maintain a strong credit score in order to qualify for a mortgage, since credit scores are used by lenders to measure financial health.
If you are concerned about your current credit score here is some advice on common credit problems you should avoid.
- Don’t be late. Paying bills on time is essential, since a person’s payment history makes up 35% of the total credit score. A late bill payment of 30 – 60 days also gets reported to credit bureaus and stays on the credit report for seven (7) years.
- Applying for new credit. According the National Association of Realtors applying and being approved for a new line of credit can cause concern with lenders who might take it as a sign that there’s a higher risk of default due to increased spending. Bottom line, if you are planning to apply for a home loan in the near future, make sure you don’t apply for anything else around the same time.
- Having high balances. Making minimum credit card payments isn’t good enough for most mortgage companies. People who hold high credit balances are not looked at as favorable loan candidates since high balances and maxed out cards raises the debt-to-income ratio, according to lenders.
- Too much disputing. While it’s good idea to keep tabs on your credit report and dispute false charges, doing so too-often will be a red flag to lenders who may chalk it up to gaming the score instead..
- Not having a credit history at all. Credit can’t be established if there’s none to begin with, so if you have a thin credit file, then you need to start building credit history before applying for a home loan.
If you or anyone you know needs real estate advice or credit building advice then please do not hesitate to contact me.
Donna Bishop Realtor phone 239-560-3149 or email; email@example.com
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