You’ve been careful with your finances, saved for a downpayment, and finally received approval for a mortgage loan. It’s time to celebrate, right? Not yet. Your lender will recheck your credit right before closing. Don’t give him or her reason to question your creditworthiness by making these mistakes: 1. Changing Jobs Changing employers could mean delays due to employment and salary verifications. Of course, you shouldn’t ignore a great career opportunity. It means only that optional moves should wait. 2. Making a Big Purchase Your debt-to-income ratio is an important factor when being considered for a loan. If you add to your debt by purchasing a car or boat, you risk exceeding the ratio that your lender finds acceptable. 3. Opening Credit Accounts You might apply for a credit card so you’re ready to buy furniture for your new house. But similar to taking on new debt, applying for a new credit account can harm your mortgage approval. The credit inquiry necessary for the new account will ding your credit score a few points, and the lender might wonder just how much you plan on spending with that new account. Part of the mortgage process is a final check to ensure you can afford the loan. Neither you nor the lender wants the payments to be a struggle, so don’t give the lender any reason to doubt your creditworthiness. There are other ways a transaction can fall apart before closing. Be sure to consult with your REALTOR® about contract deadlines and other to-do items to ensure you close on your new property.
There aren’t shortcuts to improving your credit score. You’ll need to make sound financial decisions for at least several months to offset previous damage you’ve done to your credit record. But that doesn’t mean it can’t be done. Here are four steps to improve your score and increase the chances you’ll qualify for a favorable mortgage loan. Check Your Credit Report Verify that the items listed on your report—especially the negative ones—are correct. If there are mistakes, correcting them is an easy way to help your score. You can order free copies of your credit report at annualcreditreport.com. Pay Overdue Accounts Past-due balances are very damaging to your score. Pay off the debt or at least negotiate a plan to get those accounts current. Once current, those accounts will stop adding negative information to your credit report and can generate positive credit-score movement. Use Less of Your Available Credit Carrying a $2,000 balance on a Visa card with a $3,000 limit isn’t going to help your credit profile. Try to pay down those balances, if possible, to less than 50% of your available credit. Another option is to ask for a higher limit. If Visa raises the limit on that card to $6,000, your balance looks better—as long as you resist the urge to add to the balance on that card. Don’t Close Accounts This one is counterintuitive, but closing a credit card account lowers your available credit. Keep that card active and set it up to autopay one or two small, recurring bills, such as your Netflix membership. When you’re ready to start looking for a home, talk to a Texas REALTOR®. He or she can help you understand the many aspects of the homebuying process.